New Delhi: The Indian Rupee strengthened significantly on Monday, driven by the Reserve Bank of India's (RBI) record dividend announcement and b foreign investor buying. In early trading, the Rupee appreciated by 40 paise, reaching 85.05 per US dollar, a substantial gain compared to the previous session's closing price of 85.45 per dollar.
In the interbank foreign exchange market, the Rupee opened b at 85.02, later touching 84.98 before settling slightly lower at 85.05. According to forex traders, the weakening of the US dollar and the surge in domestic stock markets boosted the Rupee. Furthermore, the RBI's announcement of a record ₹2.69 lakh crore dividend to the central government for the fiscal year 2024-25 also provided support to the Rupee.
Weaker Dollar, Stronger Stock Market
The dollar index, which measures the US dollar against six major currencies, fell by 0.34% to 98.67. The domestic stock market also witnessed a b rally. The BSE Sensex closed at 82,351.76, up 630.68 points, while the Nifty surged 187 points to 25,040.15. Brent crude traded at $64.99 per barrel in the international market, up 0.32%.
Impact of Foreign Investor Buying
Foreign Institutional Investors (FIIs) made net purchases of ₹1,794.59 crore in the Indian market on Friday, further strengthening the Rupee. Also, according to the latest data released by the RBI, India's foreign exchange reserves decreased by $4.888 billion to $685.729 billion in the week ended May 16.
Impact of RBI's Record Dividend
It is noteworthy that the RBI has decided to transfer a dividend of ₹2.69 lakh crore for the fiscal year 2024-25, which is 27.4% higher than the ₹2.11 lakh crore dividend paid last year. This increase is attributed to a change in the limit of the contingency risk buffer, which is now set at 6% (plus/minus 1.5%), compared to the previous range of 5.5% to 6.5%.
Significance of this Strengthening
The Rupee's current strength is fueled by the RBI's dividend announcement and foreign capital inflows. However, the global market conditions, oil prices, and the trajectory of the US dollar may influence the Rupee's movement in the future. Investors are advised to exercise caution while investing in the foreign exchange market and seek expert advice.
