Indian Rupee Rises 0.2% to 93.69 per Dollar as Foreign Inflows Return

Key Facts

The Indian rupee closed at 93.69 per dollar on Wednesday, November 11, up 0.2% during the session, after touching 93.6350 in trade, its strongest level since April, according to a Reuters report. The improvement came as foreign investors returned to Indian equities and oil prices fell, two factors that supported the currency during the session. EL7 data show the dollar-rupee pair closing at 93.7275 on the same day, after 93.918 on November 10. Dollar strength, meanwhile, continued to weigh on the Indian currency, the report said. The 93.69 level refers to Wednesday’s close; the documented facts do not provide a level attributable to Thursday, November 12.

Foreign investors’ purchases of Indian shares rose to $1.34 billion on Wednesday, according to preliminary data cited by Reuters. The purchases lifted inflows since the start of November to nearly $8 billion through that day. The return of inflows links equity-market performance with demand for the rupee, as foreign purchases reflect money entering Indian assets. But the shift followed a period of heavy outflows: Reuters reported that foreign investors had withdrawn more than $30 billion from Indian shares during the year before November’s rebound. Positive inflows have thus returned after a large wave of outflows, without by themselves erasing the scale of the earlier withdrawals.

Lower oil prices were another factor supporting the Indian currency, Reuters said, with Brent crude trading around $92 a barrel on November 11, after reaching $118 less than two weeks earlier. The drop in oil eases one source of pressure on the rupee, in the context of the report, which linked lower crude prices to the currency’s improvement. That support coincided with foreign share purchases and did not occur independently of dollar movements. The report said hot U.S. inflation data and hawkish comments from Federal Reserve officials were associated with strength in the U.S. currency. Traders said markets were fully pricing in a 25-basis-point rate hike in December, according to the report, citing the CME FedWatch tool.

These concurrent factors highlight two opposing forces in the rupee’s movement: equity inflows and lower oil prices supported it, while U.S. monetary-policy expectations strengthened the dollar. Foreign purchases totaled $1.34 billion in one day, within monthly inflows of nearly $8 billion, while foreign withdrawals from Indian shares had exceeded $30 billion earlier in the year. In energy markets, Brent was near $92 a barrel after reaching $118 less than two weeks earlier. In the United States, the report said traders were fully pricing in a 25-basis-point rate increase in December. Wednesday’s session therefore brought together domestic indicators supporting the currency and U.S. expectations that strengthened the dollar.

India’s October inflation data were the next economic event cited by Reuters, with a poll conducted between November 2 and 6 forecasting annual inflation to rise to 5.93% from 5.54% in September. The median forecast was based on the views of 36 economists, the report said. The comparison puts the October estimate above September’s recorded reading, with the data scheduled for release on Thursday. That date follows Wednesday’s session, when the rupee reached its strongest level since April, according to the Reuters report. The available facts do not include the data release result, so October’s figure remains a poll forecast rather than an actual reading.