Rupee hits 3-week high on dollar inflows, RBI seen buying at lower levels

The Indian currency gained 23 paise on Tuesday, closing at its highest level in over three weeks, supported by likely dollar inflows and dollar sales by exporters, even as state-owned banks bought the US currency on behalf of the Reserve Bank of India.

The rupee closed at Rs 86.57 against the dollar, compared to the previous close of Rs 86.80. It opened stronger at Rs 86.76 and strengthened to Rs 86.54 intra-day, though dollar buying by state-owned banks prevented further appreciation, forex dealers said.

The Indian rupee recorded its most significant five-day percentage gain since March 2023, said Dilip Parmar, a research analyst at HDFC Securities.

“Robust economic data, optimistic market sentiment, and expectations of foreign fund inflows provided substantial support to the domestic currency,” he said.

The rupee’s gain was also aided by softness in the dollar index, which eased to 103.3.

However, the Reserve Bank of India is seen buying at lower dollar levels to rebuild forex reserves, another forex expert noted.India’s forex reserves stood at $654 billion as of March 7, about $51 billion lower than the all-time high of $705 billion recorded at the end of September last year.