Forex: Halting a two straight weeks of downfall, the rupee made a strong comback against the US currency and ended at a near 21-month high of 64.24 – surging by a good 37 paise on heavy dollar selling by exporters and corporates. This is the rupee’s highest closing since August 11, 2015, when it had ended at 64.19 against the greenback. A collective sigh of relief largely drove global currency and financial markets higher worldwide at the start of the week on waning anxiety over the European political landscape. The overall forex market sentiment witnessed sustained buoyancy supported by unwinding of long-dollar positions by speculators against the backdrop of rising risk-on sentiment.
The momentum also got an additional push on growing expectations for robust foreign inflows to India sparked by a renewed optimism about the US economy. Healthy FII inflows into equities and debt also supported the recovery momentum. Foreign investors pumped in a staggering $ 3 billion in the capital markets this month so far as regulator Sebi has raised investment limit for FPIs in government debt. Though, currency traders kept an eye on recent geopolitical developments. The incredible bullish sentiment seems to be borne out of a weaker dollar which also provided a boost for emerging market currencies, a forex dealer commented.
However, the RBI intervened in the market through state-run banks in both the spot and the forward markets to prevent further gains in the rupee, he added. The domestic currency resumed higher at 64.55 from last Friday’s closing value of 64.61 at the Interbank Foreign Exchange market and powerheaded relentlessly to hit multi-year high of 63.93 on Wednesday supported by overall positive momentum. However, some month-end dollar demand from importers alongwith RBI’s tight interventions to check the rupee’s intraday day volatility, shaved off strong early gains towards the fag-end trade. It finally settled at 64.24, showing a smart gain of 37 paise, or 0.57 per cent.
In worldwide trade, the greenback succumbed to intense selling on disappointment over U.S. President Donald Trump’s much awaited tax plan amid caution ahead of US Federal Reserve meet next week. Adding to recent uncertainty about the economy, macro data showed that US economic growth in the first quarter of the year slowed to the weakest pace since 2014. The dollar index — a measure of the US currency against a basket of peers declined further to settle at 98.89 from last weekend level of 99.66. Meanwhile, the euro was the big winner after the French vote — hitting a five-month high against the dollar and Sterling also jumped near its strongest since October.
Meanwhile, country’s forex reserves were just short of the life-time high after rising by $1.250 billion to $ 371.14 billion in the week to April 21, helped by increase in foreign currency assets, the Reserve Bank said. The reserves had touched a life-time high of $371.99 billion in the week to September 30, 2016. The RBI fixed the reference rate for the USD at Rs 64.2170 and Euro at Rs 69.8809 against preceding week’s level of Rs 64.5701 and Rs 69.1675, respectively.
In cross-currency trade, the Indian unit tumbled further against the British Pound for the third-week and ended lower at 83.13 from last Friday’s level of 82.55 per pound and also dropped further sharply against the euro to end at 70.23 as compared to 69.16. The local currency, however rebounded smartly against the Japanese Yen to settle higher at 57.69 per 100 yens from 59.23 earlier. In the forward market, premium for dollar continued to drift owing to consistent receivings from exporters.
The benchmark six-month forward dollar premium payable in September declined to 133.5-135.5 paise from 144-146 paise and the far-forward contract maturing in March 2018 also dropped to 292.5-294.5 paise from 303.5-305.5 paise last weekend. In global commodity trade, Oil prices once again had a volatile week as news of another rise in US weekly gasoline inventories added to concerns about global oversupply amid news that oilfields in Libya resumed production. U.S. oil prices have lost ground in eight of the last 11 sessions. The U.S. light crude settled at $ 49.33 a barrel on Friday, up 36 cents.