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Rupee Surged To 2 Week High, Up 7 Paise Against Dollar

Heavy unwinding of dollars by banks and corporates alongside steady steam of foreign fund inflows predominantly supported the rupee upmove, stretching gains for the second straight day.

Photo Credit : Shutterstock


The rupee strengthened further by 7 paise to end at a fresh two-week high of 64.53 against the US currency on sustained dollar selling by exporters amid a spectacular record rally in domestic equities.

Heavy unwinding of dollars by banks and corporates alongside steady steam of foreign fund inflows predominantly supported the rupee upmove, stretching gains for the second straight day.

Though, heightened uncertainty over the Federal Reserve's interest rate trajectory and bullish dollar sentiment overseas partially weighed on the domestic currency.

The home united opened higher at 64.57 compared to weekend close of 64.60 at the Interbank Foreign Exchange (Forex) Market.

It was largely confined to a tight range for most part of the day with no directional strength and gradually touched a high of 64.48 in late afternoon deals before ending the day at 64.53, showing a healthy rise of 7 paise, or 0.11 per cent.

On Friday (7 July), the domestic unit rebounded 18 paise to end at a fresh one-week high.

The RBI, meanwhile, fixed the reference rate for the dollar at 64.5405 and for the euro at 73.5826.

The greenback, however, traded firmly higher against all its major trading partners as the latest US jobs data gave investors greater confidence in the strength of the economy.

It was a complete Bulls rampage on the Indian bourses with both the flagship indices ending at historic highs on the back of frantic across-the-board buying, also supported by higher global markets.

In the meantime, country's forex reserves touched a new record-high of $386.539 billion after it rose by $4.007 billion in the week to June 30, the RBI said.

Foreign investors pumped in nearly $23 billion into the Indian capital markets in January-June 2017 on the back of improvement in the macroeconomic environment along with better than expected monsoon forecast.

In comparison, FPIs had invested about $1.2 billion (Rs 7,600 crore) in the first half of 2016.

"The most prominent reason for FPIs' net inflow is expectation from the government that it would speed up development and economic reforms in their last two years in office before going for elections in 2019.

The dollar index, which tracks the US currency against a basket of six major rivals, was up at 95.93.

In cross-currency trades, the rupee hardened against the pound sterling to settle at 83.11 from 83.33 per pound and firmed up against the Japanese yen to finish at 56.54 per 100 yens from 56.83 earlier.

It also recovered against the euro to close at 73.47 from 73.74 yesterday (9 July).

In worldwide trade, the US dollar hit a two-month high against the yen as the unexpectedly high jobs data raised expectations that the Fed is on course for a third interest rate hike this year despite sluggish wage gains.

The US Dollar has put in a decent recovery over the past week, with most of the gains coming from a more legitimate expectation the Fed is committed to moving forward on rates, although investors were wary of adding big positions before Federal Reserve chief Janet Yellen's testimony this week.

In forward market today (10 July), premium for dollar showed lack of direction and ended soft due to good receiving from exporters.

The benchmark six-month premium payable in December eased to 137-139 paise from 137.75-139.75 paise and the far forward June 2018 contract also inched down to 281-283 paise against 281.50-283.50 paise last Friday (7 July).

On the International commodity front, crude prices remained under severe pressure on Monday, adding to heavy losses at the end of last week on the back of high drilling activity in the US and ample supplies from OPEC and non-OPEC nations.

The Brent crude futures, the international benchmark for oil prices, were at $46.21 per barrel in early Asian trade.


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