The Indian rupee opened stronger against the US dollar on Monday, November 2, continuing its rebound after a sharp reversal in the previous session. The currency opened at 94.89 per dollar, up 6 paise from Friday's closing level of 94.95. This gain follows a surprise recovery on Friday, which saw the rupee reverse losses that had taken it to a record low of 95.28 during the session. The recovery was driven by heavy dollar selling by a large foreign bank, though the specific flows behind the move remain unclear.
However, sustaining this recovery may be difficult. Weakness across Asian currencies and a deterioration in global risk sentiment could weigh on emerging-market currencies, including the rupee. The selloff in US technology shares has shifted investor sentiment towards safer assets, adding pressure on risk-sensitive currencies like the rupee.
Several factors could support the rupee moving forward. A decline in crude oil prices could reduce India's import bill and demand for dollars, providing some relief. Additionally, foreign investment flows may influence the currency's movement, as overseas investors were net buyers of Indian equities on Friday. The technology-led selloff in US equities could present a mixed picture, with India potentially seen as an alternative investment destination amid concerns over technology-sector valuations.
The Reserve Bank of India's net short dollar position in the forward market increased to a record $240 billion in September, up from $200 billion in August. Analysts attribute this to dollar inflows mobilized by banks under the RBI's special FCNR(B) deposit scheme. Traders expect the rupee to remain range-bound around the 95-per-dollar mark, with global currency movements, foreign fund flows, and crude oil prices being key factors to watch.