The Indian Rupee is on a five-day winning streak against the US Dollar, closing stronger at 86.57. This improvement follows five months of decline, aided by a plummeting trade deficit and investor activities. However, the banking sector faces liquidity challenges, which could impact foreign exchange reserves. Benchmark indices also rose amid positive sentiment.
The Indian Rupee has demonstrated resilience against the US Dollar, marking its fifth consecutive session of gains on Tuesday, despite ongoing foreign portfolio outflows amid increasing crude oil prices. The currency appreciated by 23 paise to close at 86.57 against the Dollar, recovering from a close of 86.80 on Monday. This marks the longest winning streak for the Rupee since September of the previous year.
In March, the Rupee has seen an increase of 1.08 percent after experiencing a five-month decline. This year, foreign investors have withdrawn Rs 1.43 trillion, with recent sales amounting to Rs 4,488 crore on Monday, as reported by NSE data. The Dollar index has dipped slightly by 0.04 percent to 103.32, reflecting a significant decrease of over 3.6 percent this month, the largest dip since November 2022.
India’s merchandise trade deficit also witnessed a significant reduction, dropping to a three-and-a-half-year low of $14.05 billion in February, driven by decreased exports and imports amid fluctuating global petroleum prices and economic uncertainties. Concurrently, crude oil prices rose for the third day, with Brent crude reaching $72.10 per barrel and WTI crude at $68.63 per barrel as of 3:20 PM IST.
The banking system in India is currently grappling with a liquidity shortfall of approximately Rs 2 trillion as of March 16, leading to concerns about the Reserve Bank of India having to absorb substantial inflows to stabilize liquidity and bolster foreign exchange reserves. Additionally, India’s stock markets, represented by benchmark indices Nifty and Sensex, experienced gains exceeding 1 percent on Tuesday, supported by positive global sentiment and strong domestic buying activities.
In summary, the Indian Rupee has displayed a notable strength against the US Dollar, achieving its longest winning streak in six months despite foreign selling in the face of rising crude prices. The reduction in the trade deficit and movements in the banking sector further influence the economic landscape. The Indian equity markets also reflect resilience amid favorable investor sentiment.
Original Source: www.business-standard.com
