The rupee rose to as high as 70.55 against the dollar on Monday before closing the session at 70.765 against the greenback.
The rupee closed at a five-week high on Monday, led by positive cues from the Asian currencies after reports indicated the US and China may soon reach an interim trade deal. The rupee rose to as high as 70.55 against the dollar on Monday before closing the session at 70.765 against the greenback.
The Chinese yuan rose after US commerce secretary Wilbur Ross said on Sunday that he is optimistic the US would reach a phase one trade deal with China this month and that the countries’ leaders are planning to meet soon.
On top of this, the Indian equity markets continued to receive strong inflows from foreign portfolio investors (FPIs). In the last two sessions, foreign investors poured over $500 million on a net basis while FPIs bought $2.3 billion worth of shares since the beginning of October. At the same time, FPIs bought Indian debt worth $947 million in the same period.
MV Srinivasan, vice-president at Mecklai Financial Services, confirmed that the yuan opened quite strongly on Monday morning following comments from Ross, that in turn impacted the rupee also.
“Dollar weakness in the overseas market has also contributed to the rupee strength while the recent inflows into the Indian equities have provided modest support to the currency. Most of the data coming out of the US have been slightly unfavourable for the greenback in recent times. If yuan goes below 7 in coming days, the rupee will continue to track the yuan. However, comments on the US-China trade development will dictate the direction,” he said.
The dollar index, which tracks the strength of the US dollar against a basket of US trade partners’ currencies, moved down by about 2% since the beginning of October to 97.288 as on Monday evening.
The rupee has remained relatively stable this year, led by strong FPI and foreign direct investment flows. Compared to over 13% depreciation last year, the rupee has seen a 1.41% depreciation so far in 2019.