The Indian rupee climbed to its strongest level since April on Wednesday, holding its ground even as the US dollar gained broadly across global markets.
The currency closed at 93.69 per dollar, up 0.2% on the day. Earlier in the afternoon, it had reached a high of 93.6350.
Still well off its lows
The rupee has come a long way back from its weakest point this year. It hit a record low of 96.96 in May and came close to breaking that level again last month. It is now down about 4% so far this year, having recovered roughly half of the losses it suffered at its worst point.
Why the rupee held up
Traders said dollar selling was spread across the market throughout the session. Activity in the non-deliverable forward market, where contracts are settled in dollars rather than rupees, also pointed to improving sentiment towards the currency.
Those gains came despite pressure from the dollar side. Hot US inflation data and hawkish comments from Federal Reserve officials pushed the greenback higher.
What the Fed may do next
Traders now fully expect the US Federal Reserve to raise interest rates by 25 basis points in December, according to the CME FedWatch Tool. They have also priced in a small chance of a larger 50-basis-point increase.
Analysts at ING said in a note that the case is growing for the Fed to push rates into restrictive territory. The aim would be to slow overall demand and bring inflation back to its target.
Higher US rates would normally weigh on the rupee. However, traders are currently more focused on something else: a pickup in foreign money flowing into Indian equities.
Foreign investors return
Foreign investors have poured in nearly $6 billion in November so far. That is their biggest monthly purchase since September 2024. India’s benchmark Nifty 50 index also rose on Wednesday.
Inflation data in focus
Attention now shifts to India’s consumer inflation figures for October, which are due for release on Thursday. A Reuters poll of 36 economists, conducted between November 2 and 6, expects annual consumer inflation to have risen to 5.93% in October, up from 5.54% in September.