The rupee is staging a sharp recovery, gaining more than 3 percent from its record low of 96.90 against the US dollar. Trump's setback in the US midterm elections, coupled with crude oil prices slipping back below the $100-per-barrel mark, has lifted hopes of a more favourable global environment for emerging markets like India. With foreign investors returning to domestic equities, analysts are now projecting the rupee to strengthen towards 92.5 against the US dollar by December-end.
The domestic currency opened 10 paise stronger at 93.81 against the US dollar on Monday, November 9, compared with its previous close of 93.91. The recovery has gathered pace over the past week, supported by improving global sentiment, lower crude oil prices and a sharp pickup in foreign portfolio investor (FPI) inflows.
Anindya Banerjee, Head of Commodities Research at Kotak Neo, believes the rupee could strengthen further if geopolitical tensions in West Asia do not escalate again.
"If the war doesn't restart anytime soon, there is a good opportunity that we may actually break 94. Once it breaks 94, a lot of exporters who have been holding out from hedging or selling would come into the market, and that can push the currency towards 92.50 levels," he said.
However, Banerjee cautioned that the outlook would depend significantly on crude oil prices remaining lower for a sustained period.