Mumbai: The rupee bounced back after a two-day slide and ended at 40.3750/3800 against the greenback on 31 July, stronger by 17 paise from the last close of 40.5450/5550, driven by a strong rally in equity markets.
The quarterly review of monetary policy released by the Reserve Bank of India (RBI) had a positive impact on forward market, forex dealers said.
In fairly active trade at the Interbank Foreign Exchange market, the local currency resumed firm at 40.45/47 per dollar and surged throughout as buoyancy gathered momentum on the equity markets.
The rupee drew support from expectations of increased portfolio inflows in the fastest growing economy after the central bank removed the Rs 3,000-crore cap on daily reverse repo (overnight borrowing) transaction for money market operations, the dealers added.
The RBI also left its key lending rate unchanged at 7.75% in its policy review.
The benchmark Sensex soared by 290 points or nearly 2% in response to the encouraging credit policy.
The RBI’s decision to remove the cap on its daily money market operations to drain cash from the system is seen as a significant factor in the rupee market, a leading dealer with private bank commented.