At the interbank foreign exchange, the rupee opened at 90.22 and strengthened as market participants weighed currency flows and global cues.
Analysts said the uptick, however, was limited due to lingering geopolitical tensions.
Global factors at play
The dollar index, which tracks the US currency against six major peers, traded slightly higher at 98.22.
“The dollar eased after US ISM Manufacturing PMI came in lower than expected at 47.9, signaling potential rate cuts amid a slowing economy,” said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
Brent crude futures dipped 0.31% to $61.57 a barrel, providing further relief to the rupee.
Geopolitical and trade pressures
Despite early gains, the rupee’s appreciation faced headwinds from US geopolitical actions and trade rhetoric.
The US military operation in Venezuela and subsequent political developments also influenced market dynamics, given concerns over global oil supplies and investor risk sentiment.
Domestic market influence
Domestic equities reflected caution, with the Sensex dropping 431.95 points to 85,007.67 and the Nifty down 105.6 points to 26,144.70 in early trade.
Foreign institutional investors offloaded equities worth ₹36.25 crore on Monday (January 5), adding to rupee pressure.
“The rupee has posted four consecutive sessions of losses and is down more than 1% over just over two weeks,” said a currency trader at a leading bank. “Importer hedging and muted foreign inflows at the start of the year have contributed to the weakness.”
Central bank intervention
The Reserve Bank of India has intervened in currency markets during bouts of weakness, initially defending the 90 mark but stepping back due to persistent dollar demand.
Analysts say the RBI is likely to continue moderating sharp swings, though the broader direction remains influenced by global and domestic flows.
Outlook
While the rupee may find some support from the dollar retreat and easing crude prices, experts say risks remain. Market participants are eyeing upcoming US economic data for cues on Federal Reserve policy, with two rate cuts currently priced in for 2026.
“The near-term trend suggests the rupee may remain under pressure, but occasional relief could emerge from softer dollar and oil dynamics,” the bank trader added.
-With agencies inputs
