The Indian rupee ended stronger as it strengthened by 28 paise to close at 86.36 against the US dollar.
The domestic currency had gained 15 paise to open at 86.49 against the US dollar on Wednesday, after closing at 86.64 on Tuesday. This marks a brief recovery for the rupee, which had recently been on a downward trend, hitting an all-time low of 86.6 against the dollar. However, this decline has been gradual compared to other global currencies.
Market experts are now predicting that the rupee could hit 87.50, particularly with the upcoming changes in the global economic landscape as US President-elect Donald Trump assumes office. Trump's planned trade tariffs are seen as a key factor likely to impact global currencies, and many believe that regulators may have limited capacity to protect their currencies from these pressures.
On Tuesday, the rupee ended at a record closing low, falling by seven paise to 86.65 against the dollar. Earlier in the day, the currency had strengthened to 86.52, supported by a decline in oil prices and a weaker US dollar index during the Asian trading session. However, it then slid to an intraday low of 86.70 before settling at 86.65.
The Reserve Bank of India has maintained a flexible stance on the rupee, indicating that it is not targeting specific levels for the currency. The central bank has adequate reserves to manage any sharp volatility in the forex market, according to people familiar with the matter. The RBI is currently taking a 'wait-and-watch' approach, especially in light of political developments in the US.
In addition to the ongoing forex concerns, the Indian economy continues to face pressure from rising commodity prices, particularly crude oil. Oil prices have recently tested $81 per barrel, and with fresh sanctions on Russia's oil industry and declining US crude inventories, prices are expected to stay elevated. This, along with increasing demand for non-Russian crude, is likely to further widen India’s trade deficit.
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