The rupee surged by a massive 78 paise to end at a nearly one-and-a-half year high of 65.82 against the US dollar on frantic unwinding of the American currency following BJP's emphatic victory in Uttar Pradesh.
The rupee surged by a massive 78 paise to end at a nearly one-and-a-half year high of 65.82 against the US dollar on frantic unwinding of the American currency following BJP’s emphatic victory in Uttar Pradesh. Forex market sentiment soared on hopes that BJP’s stellar show in state polls would pave the way for the Modi government to focus on key reform measures.
The home currency resumed on a strong footing at 66.20 from last Friday’s closing value of 66.60 at the Interbank Foreign Exchange (forex) market on heavy dollar unwinding from speculative traders and exporters tracking weekend developments.
Maintaining its bullish momentum against the dollar, the rupee hit a fresh intra-day high of 65.76 in late afternoon deals before ending at 65.82, showing a solid gain of 78 paise, or 1.17 per cent. This is the highest closing of the rupee since November 6, 2015 when it had ended at 65.76.
Meanwhile, the RBI fixed the reference rate for the dollar at 66.1800 and for the euro at 70.4354. Financial markets too took comfort from BJP’s landslide victory, with the broader Nifty climbing 152.45 points to a new closing peak of 9,087 and the Sensex rallying 496.40 points to end at 29,442.63.
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The much-anticipated turnaround on the economic front has opened up a barrage of foreign capital fund flows into India. Foreign investors pumped in over Rs 10,000 crore in the Indian capital markets this month so far.
It also got an added fillip from bullish macro data, which showed that the country’s industrial production bounced back in January, expanding by 2.7 per cent year-on-year. Factory output measured in terms of Index of Industrial Production (IIP) had contracted by 0.1 per cent in December.
However, inflation based on wholesale prices shot up to a 39-month high of 6.55 per cent in February against 5.25 per cent in January, according to official data. On the global front, the dollar traded firmly higher against its major counterparts ahead of the two-day Fed meet when it could lift rates for the third time since the financial crisis.
The US dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was trading lower at 101.48.
In cross-currency trade, the rupee also jumped against the British Pound to finish at 79.84 from 80.95 and hardened further against the Japanese Yen to end at 57.26 per 100 yens compared to 57.73 earlier. The home currency recovered against the euro to conclude at 69.99 from 70.63 last weekend.
Meanwhile, the country’s foreign exchange reserves jumped by $1.218 billion to $364.01 billion in the week ended March 3. In the previous week, the reserves had shot up by $63.7 million to $362.79 billion. In the forward market, premium for dollar recovered in view of paying pressure from corporates.
The benchmark six-month premium for August edged up to 147-149.50 paise from 146-148 paise and the far-forward February 2018 contract also moved up to 300-304 paise from 298-300 paise.