Rupee edges lower to 93.73 against dollar despite strong foreign fund inflows: Here’s why

Résumé détaillé

The Indian rupee opened lower at 93.73 against the US dollar on Thursday, weighed down by a stronger greenback despite rising foreign equity inflows and falling crude prices.

The Indian rupee opened lower by 4 paise against the US dollar on Thursday (November 12) at 93.73, compared with its previous close of 93.69 on Wednesday (November 11).

The domestic currency's opening decline came despite a revival in foreign equity inflows, which has provided some support to the rupee, offsetting the impact of a strengthening US dollar.

Foreign investors bought Indian equities worth $1.34 billion on Wednesday (November 11), according to provisional data. This took their month-to-date inflows to just under $8 billion.

The reversal in foreign portfolio investor (FPI) flows has been significant. After withdrawing more than $30 billion from Indian equities earlier this year, foreign investors have returned to the domestic market in November.

The shift in flows has been partly attributed to concerns over tighter US restrictions on AI data-centre construction following the Democratic Party's election victory. This has unsettled the AI investment trade, prompting investors to reduce exposure to semiconductor-heavy markets and redirect capital towards India as a diversification option.

The revival in foreign inflows has provided support to the rupee and reinforced the Reserve Bank of India's efforts to stabilise the currency.

A decline in crude oil prices has also offered some relief. Brent crude was hovering around $92 per barrel, down from a high of $118 less than two weeks ago.

However, gains in the rupee remain constrained by a stronger US dollar. The dollar index held near a one-month high against major currencies in Asian trade on Thursday.

Expectations of further monetary tightening by the US Federal Reserve have supported the dollar. These expectations strengthened following higher-than-expected US inflation data for October and hawkish comments from US central bank officials.

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