The Indian rupee strengthened against the US dollar on Wednesday after nearing the Rs 84 mark in the previous session, on expectations of substantial inflow after India's weight on key MSCI equity index rises to record high.
The rupee appreciated by six paise to open at Rs 83.91 against the US dollar, according to Bloomberg. It had closed at Rs 83.97 on Tuesday.
"Looking ahead, India's weight on the MSCI Global Standard Index, which tracks emerging market stocks, has reached a new record high, positioning it for substantial inflows,” said Amit Pabari, managing director of CR Forex Advisors.
The short-term projections suggest the rupee will trade within Rs 83.90–84.05 range against the dollar, he said. He stated that in the medium term, the range is slightly broader, ranging from Rs 83.90 to Rs 84.20.
However, rising crude oil prices and a steady dollar may limit the gains in the rupee. The US dollar index was up 0.01% at 102.6, and the Brent crude oil price rose 0.4% to $81.01 per barrel as of 9:00 a.m.
Oil prices rose in early trade, recovering from Tuesday's losses. This rebound was driven by an industry report indicating a significant decrease in US crude inventories and ongoing tensions in the Middle East.
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Wednesday will see the release of the US consumer inflation report, and recent data showed that the US producer price index increased less than anticipated. The PPI report's categories, which determine the Federal Reserve's preferred inflation measure, exhibited a generally subdued trend.
With inflation data set to be released today, expectations lean towards a softer outcome, driven by recent weak job data signalling an economic slowdown, according to Pabari.
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