The rupee strengthened sharply at the open on Thursday, tracking the decline in the dollar and oil below $90 a barrel for the first time since the start of the Ukraine crisis in late February.
PTI reported that the rupee rose 27 pesos to 79.68 against the US dollar in early trading.
Bloomberg showed that the rupee last traded at 79.7437 to the dollar, compared to its previous close of 79.9037.
The rupee opened on a positive note as crude oil fell below $90 a barrel, the dollar index slipped to 109.78 and Asian currencies rose slightly, Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors, told PTI.
The dollar index continued its decline from Wednesday by falling in Asian trading on Thursday, reaching nearly 109.75, halting the recent decline in Asian currencies.
Demand for the dollar has fallen as a result of lower Treasury yields and increased risk appetite. Overnight, the S&P 500 rose 1.8 percent, while the 10-year Treasury yield was down about 11 basis points from its peak.
On Wednesday, Brent crude futures fell more than 5 percent on concerns about demand, hitting their lowest level since February.
Fears of a slowdown in China and monetary policy tightening by the Federal Reserve and other central banks have contributed to a more than one-fifth drop in the value of oil prices since the beginning of August.
A Mumbai-based bank trader told Reuters that concerns about the global economic outlook are helping the rupee “in some way” as it leads to a “significant” decline in oil and other commodities.
“Obviously growth concerns are likely to lead to portfolio outflows from emerging markets, but since early July this has not been a problem for India,” the trader added.
According to data from National Securities Depository Limited (NSDL), foreign investors bought more than $6 billion worth of Indian stocks in August. This month, investors bought goods worth about $330 million.
The focus now shifts to the European Central Bank meeting and Fed Chairman Jerome Powell’s speech later in the day.
Forex traders said the Indian currency could weaken further after tracking the dollar’s strength ahead of US Federal Reserve Chairman Jerome Powell’s speech and European Central Bank meeting.