Rupee gains 3 paise against dollar in early trade Friday

The rupee opened at 94.78 at the interbank foreign exchange market on Friday, marking a modest gain of 3 paise from its previous close of 94.81. The currency traded in a narrow band during early session, reflecting the competing pressures affecting Indian forex markets.

Foreign institutional investors have maintained a cautious stance, seeking shelter in US dollar assets as yields on American Treasury securities remain elevated. This flight to safety has bolstered the greenback globally, putting downward pressure on emerging market currencies including the rupee, according to market analysts. The dollar index, which tracks the US currency's performance against six major peers, was up 0.04 per cent at 101.64.

Crude oil prices have also weighed on the rupee, with Brent crude trading at USD 113.65 per barrel, up 0.42 per cent during the session. The elevated oil benchmark adds to India's external sector challenges, as the nation remains a significant petroleum importer. Brent crude hovering near USD 113 per barrel reflects broader macroeconomic uncertainties that continue to pressure emerging market currencies.

Market participants attribute the rupee's weakness to a combination of factors including persistent global dollar strength and capital outflows from foreign investors seeking safer assets. The combination of elevated US yields, strong dollar momentum, and rising crude costs has created a challenging environment for the Indian currency in recent trading sessions.