Indian rupee opened stronger on Friday, rising 15 paise to 95.32 against the US dollar in early trade, supported by a weaker greenback in global markets and positive sentiment in domestic equities.
Forex traders said the local currency benefited from easing demand for the US dollar and improved investor confidence. However, gains remained limited as concerns over global trade tensions, crude oil prices and persistent foreign fund outflows continued to weigh on market sentiment.
The rupee’s movement comes at a time when the Reserve Bank of India (RBI) is facing growing challenges in managing the country’s foreign exchange reserves after stepping up interventions to stabilise the currency. According to market estimates, the central bank may need to replenish nearly $100 billion in reserves following extensive dollar sales aimed at defending the rupee against sharp volatility.
The RBI has actively intervened in the foreign exchange market over the past several months to smooth excessive currency fluctuations. While these interventions have helped contain volatility, they have also reduced the stock of foreign exchange reserves, prompting expectations that the central bank could gradually rebuild its dollar holdings when market conditions improve.
Analysts believe the RBI is likely to remain focused on maintaining orderly market conditions rather than targeting a specific exchange rate. They expect the central bank to continue balancing currency stability with adequate liquidity in the financial system.
Meanwhile, investors are closely tracking global developments, including US economic data, expectations around Federal Reserve interest rate decisions and geopolitical tensions, all of which influence the direction of the dollar and emerging market currencies.
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