The Indian rupee strengthened 1.70 percent to 81.35 against the US dollar in November, marking it's first monthly gain since December 2021. During Wednesday's trade, the Indian currency opened at 81.64 against the USD and gained ground to touch 81.35, registering a rise of 26 paise over its previous close of 81.61.
The rupee has been under tremendous pressure since the start of the year due to a variety of factors, including the rise in crude oil prices, a strengthening dollar, and FPI outflows. However, the price of crude oil and the US dollar have both corrected sharply, giving the Indian rupee some breathing room.
The rupee has managed to gain 1.91 paise against the US dollar in the past few weeks after hitting an all-time low of ₹83.26 on October 20. Nonetheless, it is down 9.25 percent against the US dollar this year and 6.31 percent since the US Fed began raising interest rates in March.
Crude oil prices have been volatile over the last few months, due to worries about the rise in Covid cases in China, the world's largest crude importer, mounting recessionary fears, the impending European ban on Russian oil, and the price cap plan of the G7 countries.
In November, Brent crude futures lost 4.45 percent to $86.71 a barrel, while WTI has fallen 5.68 percent to $80.65 a barrel during the same period. Crude oil prices have been trading below $100 for the past five months.
Low crude oil prices will reduce India's inflation and also lower pressure on the current account deficit, given that India imports more than 85 percent of its crude oil needs.
Meanwhile, the yield on the 10-year Treasury note fell 16 basis points to 7.28 percent in November, down from 7.44 percent in October. Both bond yields and prices move in opposite directions.
On the other hand, the US Dollar Index, which gauges the greenback's strength against a basket of six currencies, dropped 5.01 percent in November, the largest monthly drop since July 2020.
After the US annual inflation rate dropped to 7.7 percent in October, the lowest annual increase since January, and slowed from 8.2 percent in September, there was growing hope that the US Federal Reserve would soon be less aggressive in raising interest rates.
At 105.70, the US Dollar was down almost 7.90 percent from its 2022 peak of over 114.77. However, the dollar index is still up by 10.17 percent in this current year.
Besides, the Indian rupee has benefited from FPIs' strong comeback. FPIs invested a net sum of ₹29,322 crore in Indian equities in November, Trendlyne data showed.
Furthermore, Sensex and Nifty gained 3.87 percent and 4.14 percent in November, respectively, after gaining 5.78 percent and 5.37 percent in October.
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