Rupee rises 10 paise against US dollar: What is supporting the currency?

Rupee rises 10 paise against US dollarRupee began Thursday on a positive note, recovering 10 paise to trade at 96.65 against the US dollar in early deals. The recovery comes amid likely intervention by the Reserve Bank of India, which may have helped the currency hold ground despite continued pressure from global and domestic factors.The currency had opened at 96.71 at the interbank foreign exchange market before moving up to 96.65. Earlier on Wednesday, it ended at 96.75 against the dollar.Despite the early recovery, forex traders said the rupee remained under pressure from a combination of a stronger US dollar, elevated crude oil prices and sustained foreign fund outflows. The DXY was trading near multi-month highs, while Brent crude remained around the $102-a-barrel mark.The decline in India's forex reserves has added to the pressure on investor sentiment. Reserves have fallen by $50 billion in three weeks from the September peak of $786 billion."Strong corporate importer demand for dollars together with safe-haven capital shifts overpowered the RBI's hawkish policy stance, driving USD/INR higher through the afternoon until routine state-run bank interventions helped stem further losses," said Anil Kumar Bhansali head of treasury and executive director Finrex Treasury Advisors LLP.Market participants are now looking towards the RBI for action against speculation in the USD/INR pair. Forex traders said the RBI Governor has assured that the central bank would help the rupee find its true value, with the currency presently considered undervalued.The dollar index was at 102.25, gaining 0.01% against a basket of six currencies.Oil prices, meanwhile, remained elevated. Brent crude futures climbed 2.17% to $102.37 per barrel as concerns over disruptions to supplies through the Strait of Hormuz weighed on the market."The main reason for the rebound in crude oil prices is persistent concern over Middle East supply and shipping disruptions, particularly with attacks on tankers in the Gulf and around the Strait of Hormuz intensifying," Bhansali said.The pressure on the currency came alongside weakness in domestic equities. BSE Sensex was down 264.97 points at 72,408.15 in early trade, while NSE Nifty50 declined 87.50 points to 22,507.65.Foreign Institutional Investors (FIIs) were net sellers in Indian equities on Wednesday, offloading shares worth Rs 6,121.37 crore, according to exchange data.