Early in the day's trading, the Indian Rupee was stable against the US dollar at 82.90, repeating the closing values from Thursday. Despite outflows of foreign funds and the volatility of global crude oil prices, this calm in the value of naira has been noticed. On the other hand, strong domestic equity flows combined with the weakening US dollar factors have helped provide a positive direction to the Indian currency, preventing a considerable depreciation.

USD/INR price chart (source: Investing)

Equity Markets and Dollar Dynamics Lend Support

Domestic equity markets offered optimism as the 30-share BSE Sensex increased by 104.66 points, or 0.14%, to settle at 73,262.90. Likewise, the broader NSE Nifty was up 34.45 points or 0.16 % to 22,252.90, continuing to set new records from the previous session. The stock market rally has led to the strength of the Rupee as a general stock market gains attract inflows of foreign capital, which tends to support the local currency.

Besides, the dollar index that depicts the value of the greenback against a basket of six major currencies slightly dipped to 103.85, down by 0.02 percent. Though minimal, the strength dip of the dollar has contributed to supporting the Rupee's position, as a weaker dollar makes the Indian currency relatively more robust and more attractive to investors.

Global Factors at Play

From a global perspective the Brent crude positive futures, which are the base of the world's oil prices, decreased by 0.42% to $83.32 per barrel. The crude oil prices are of significant importance for India, a heavy oil importer, as the increased prices may lead to higher import bills and, thus, pressure on the Rupee. As a result, the current easing of moderation due to oil prices lessens the burden on the Indian rupee.

In addition, investors are concerned because they want to know how other key economic data from the US turns out. This data includes manufacturing statistics, employment data, and home sales statistics. Such data can impact the moods of the global market and, therefore, indirectly influence emerging currencies like Rupee.

Central Bank and its Role 

The Reserve Bank of India (RBI) has closely watched the rupee's movement, and any intervention has been made in case of necessity. The strategies employed by the central bank in the forex market, especially its decision not to buy dollars in the last few sessions, led to the Rupee settling at its best closing level since September.

Going forward, the Rupee's trajectory will be predominantly determined by domestic forces, such as the RBI's monetary policy route, and international factors, comprising US economic data and global oil price dynamics.