USD/INR: Foreign Investments Boost Rupee to 82.84 Against Dollar in Early Trade

In the early trading sessions of Monday, the Indian Rupee made modest gains, inching up by two paise to mark its position at 82.84 against the US dollar. This slight upward movement is primarily attributed to the influx of foreign funds, which provides a buoyant push for currency in the financial markets.

Rupee's Resilient Rise Amidst Crude Oil Fluctuations

Despite the encumbrances posed by the escalating prices of crude oil and a somewhat subdued demeanour in the domestic equity markets, the Rupee managed to hold its ground. The price of Brent crude, a significant benchmark for global oil prices, witnessed a 0.35% rise, reaching USD 85.64 per barrel. 

This surge in oil prices generally exerts pressure on the Rupee, considering India's substantial import bill for crude oil. However, the Rupee's resilience in these challenges underscores the underlying strength and confidence in the Indian economy.

Equity Markets' Subtle Influence on the Rupee

The domestic stock markets, comprising the Sensex and Nifty, showcased marginal movements, hinting at a cautious optimism among investors. The Sensex slightly ascended by about 0.1% to stand at 72,718.72 points, while the Nifty increased by 0.06%, reaching 22,036.20 points. This lacklustre performance in the stock markets often reflects a wait-and-see approach among investors, which can impact currency valuations due to intertwined market dynamics.

Foreign Investors' Growing Confidence in the Indian Market

A significant factor buoying the Rupee has been the renewed interest from foreign investors, who turned net buyers in the Indian equity markets. This shift is evidenced by their net purchase of shares worth Rs 848.56 crore. 

Such foreign portfolio investments are pivotal, as they inject capital into the markets and signify international investors' confidence in the Indian economic landscape. The first half of the month saw an impressive influx of Rs 40,710 crore, illustrating the attractiveness of the Indian market amidst a favourable global economic outlook and a sturdy domestic macroeconomic framework.

The trading landscape is also being closely watched for the upcoming decisions by major central banks, including the US Federal Reserve and the Bank of Japan. Speculations around the Bank of Japan potentially exiting its negative interest rate policy and the Federal Reserve's interest rate stance have kept investors on their toes. These decisions have far-reaching implications, influencing currency valuations and investment flows across global financial markets.

USD/INR Technical Analysis

On the USDINR 1-day price chart, the Relative Strength Index (RSI) reading of 51.71 indicates that the currency pair is now neutral. If the RSI remains at this level, USD/INR may be consolidating. However, if the RSI trend continues to rise over 70, it may indicate an impending upswing in the pair. 

USD/INR 1-day chart (source: TradingView)

The Bull Bear Power (BBP) trend in the positive region of 0.0750 suggests that the market still has bullish momentum, which supports an increase in USD/INR. This trend, paired with the RSI neutral level, indicates that the currency pair may continue sideways before potentially going higher.