The rupee today stormed to a new 17-month high and closed above 65, a level not seen since October 2015, on heavy dollar selling by speculative traders and exporters. The domestic currency finally ended the day at 64.91, up 13 paise. Abundant capital inflows from foreign investors into equity and debt markets predominantly catapulted the blistering rally on the back of adequate dollar supplies. The home currency hit an intra-day high of 64.88, triggering panic dollar selling by exporters. Speculators are shorting dollar against the rupee ahead of event risk globally in the midst of Brexit volatility. However, suspected RBI intervention through state-run banks at various levels curbed strong currency appreciation. Meanwhile, stocks recovery continued for the second straight day on improving global sentiment.
Despite a weak start at 65.10 against Monday’s close of 65.04, the home unit quickly reversed its sluggish trend to regain strength. It touched a fresh intra-day high of 64.88 before ending at 64.91, revealing a smart rise of 13 paise, or 0.20 per cent. The home currency has jumped by over 301 paise, or 4.43 per cent since the start of the year – embarking its biggest rally since early 2015.
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It has been an overwhelming positive month for the rupee as sentiment turned extremely bullish after the stunning election success of the BJP in Uttar Pradesh polls amid ambitious economic reforms expectations.
India’s improving macro fundamentals including robust 7 per cent GDP growth and a rebound in industrial production along with lesser-than-anticipated hawkish Fed policy stance too reflected in the ongoing spectacular rally.
The much-anticipated turnaround on the economic front has opened up a barrage of foreign capital fund flows into country and also stick to fiscal consolidation, while stamping on pro-growth policies in the budget.
The RBI, meanwhile, fixed the reference rate for the dollar at 64.9552 and for the euro at 70.1061.
In cross-currency trade, the rupee also recovered sharply, surging by a whopping 103 paise to finish at 80.86 per pound from 81.89 on Monday.
It firmed up against the euro to settle at 70.02 compared to 70.67 and also rebounded against the Japanese Yen to conclude at 58.54 per 100 yens from 58.99.
Globally, the dollar pulled away from 4-1/2-month lows on Wednesday after solid data backed expectations for more US interest rate hikes this year, while sterling dipped as Britain moved to launch its exit from the European Union.
The US dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was trading higher at 99.82 in early trade.
On the equity front, despite a sell-off in auto stocks after the Supreme Court imposed a ban on sales of Bharat Stage III BS III vehicles starting April 1, 2017, bourses managed to gain futher ground on good buying support in financial and capital goods counters amid strong global cues.
The flagship Sensex rose 122 points to finish at 29,531.43, while broader Nifty rose 43 points to 9,143.80. In the forward market, premium for dollar displayed a steady to modest positive trend in the absence of necessary buying support.
The benchmark six-month premium for August continued to rule steady at 134-136 paise, while the far-forward February 2018 contract settled a tad higher at 287-289 paise from 286-288 paise earlier.