Noida, Sep 3 (APAC Media): The Indian rupee strengthened sharply against the US dollar on Thursday, opening 69 paise higher at 94.29 and touching its strongest level since late June, supported by a rise in the country’s foreign exchange reserves and strong dollar inflows.
The domestic currency climbed to an intraday high of 94.27 in morning trade, its best level since June 29, according to Bloomberg data. The rupee had closed at 94.98 against the dollar on Wednesday.
Market sentiment improved after India received a significant boost to its foreign exchange reserves through the Reserve Bank of India’s special dollar-rupee swap facility and measures aimed at attracting foreign currency deposits.
According to the RBI, Indian banks mobilised $127.23 billion through non-resident foreign-currency deposits. This was supplemented by $3.89 billion raised through external commercial borrowings and $5.26 billion through overseas foreign-currency borrowings.
Overall, the special schemes attracted $136.38 billion in foreign inflows, substantially exceeding market expectations of around $80 billion to $90 billion. The larger-than-anticipated inflows have strengthened India’s external liquidity position and provided the central bank with greater room to manage volatility in the currency market.
The rupee’s appreciation also comes against the backdrop of expectations of stronger domestic growth and corporate earnings, which could encourage foreign investors to increase their exposure to Indian assets.
“With improving growth and earnings prospects, FIIs are likely to continue buying in India, despite the elevated US bond yields,” an expert said.
The RBI had unveiled the measures in June as rising crude oil prices and supply disruptions linked to the US-Iran conflict raised concerns over India’s balance of payments and widened the import burden.
The central bank’s diaspora-focused foreign-currency deposit programme accounted for the bulk of the funds raised, drawing significantly higher inflows than economists had initially projected.
The latest inflows are expected to provide additional support to the rupee while strengthening India’s foreign exchange buffer against external shocks.
–ENDS–
Disclaimer: This article is for informational purposes only and is based on publicly available information. APAC Media is not responsible for investment decisions or losses. Please conduct your own research or consult a financial adviser before investing.
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