The Indian rupee appreciated by 26 paise to 94.96 against the US dollar in early trade on Monday, reversing some of the recent pressure that had pushed the local currency toward the 95 handle. Forex dealers said the move higher came as overseas investors rebalanced their portfolios in line with the latest MSCI index revision cycle, a recurring event that typically draws passive foreign flows into Indian equities and debt instruments.
Traders tracking the USD/INR pair pointed to a firm near-term base around 95.10-95.20, suggesting that the rupee has managed to hold above that psychological level despite intermittent dollar strength in global markets. The narrow band indicates that two-way flows, rather than a one-way bet against the rupee, have been the dominant theme in recent sessions. According to market participants cited in dispatches, MSCI-related inflows have provided temporary support, helping the currency claw back ground lost in the previous week.
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Beyond the index-driven flows, traders also flagged broader dynamics shaping the rupee's trajectory. Dollar demand from importers, particularly oil refiners and gold buyers, continues to weigh on the unit, while expectations around the US Federal Reserve's policy path and domestic macroeconomic prints remain in focus. The Reserve Bank of India's intermittent intervention through the state-run banks has also been cited as a factor preventing sharper depreciation, though the central bank does not publicly disclose its dollar sales.
Globally, the dollar index has been hovering near recent ranges, with investors awaiting fresh cues from US inflation data and commentary from Federal Reserve officials later in the week. A softer dollar backdrop typically allows Asian currencies, including the rupee, some room to recover. Brent crude prices and risk sentiment in emerging markets are being closely watched for additional direction.
The rupee's intraday move comes against the backdrop of a year in which the currency has been one of the more stable performers in Asia, aided by a current account deficit that has stayed within manageable bounds and steady remittance inflows. Traders, however, cautioned that the MSCI-driven support is transitory in nature, and the pair could retest the 95.20 zone if global risk appetite weakens or oil prices climb back toward recent highs.
