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Since January this year, the rupee has weakened 13.85% and has lost the most among Asian currencies during that period. Photo: HT (HT)
Since January this year, the rupee has weakened 13.85% and has lost the most among Asian currencies during that period. Photo: HT

Rupee rebounds to 63.84 per dollar

The rupee marks its highest close since 23 August

Mumbai: The rupee closed at its highest level since 23 August on strong inflows from foreign institutional investors (FIIs) and as banks sold dollars in anticipation of an increase in inflows due to measures announced by Reserve Bank of India (RBI) last week.

The Indian currency rose 2.20% to close at 63.84 per dollar, up from Friday’s close of 65.2450 per dollar. The local forex market was closed on Monday for Ganesh Chaturti.

“Equity inflows are back in the market because investor confidence has returned..," said Hitendra Dave, managing director and head of global markets at HSBC India. Last week’s open address by new RBI governor Raghuram Rajan, measures linked to foreign currency deposits and oil companies had bolstered confidence, Dave said.

The rupee opened at 64.4750 per dollar and touched a high of 63.7750 per dollar on Tuesday.

The Indian currency has now risen 6.09% against the US dollar in the last four trading sessions since 3 September when it had closed at 67.73 per dollar. However, despite its recent steep rise, it continue to remain the biggest loser among Asian currencies.

Since January this year, the rupee has weakened 13.85% and has lost the most among Asian currencies during that period.

“Clearly there are some inflows in both the debt as well as the equity markets and since there was no trading in Mumbai Monday, there are some bunched up inflows," said a dealer with a French bank adding that though Mumbai market was shut on Monday, there were dollar inflows in other markets like Delhi and Chennai.

“Those inflows had strengthened the rupee to 64.70 per dollar in the absence of any dollar demand and today (on Tuesday) besides the inflows, the rupee has also taken comfort from news that the US attack on Syria may be delayed," the dealer with the French bank added. He didn’t want to be named.

A delay or no military action by the US in Syria could ease oil prices, helping the rupee.

A drop in the Indian trade deficit, figures for which were announced on Tuesday, also helped the rupee. India’s trade deficit fell to a five-month low of $10.9 billion in August, because of a decline in gold imports and double-digit growth in exports.

Exports grew 13% in August from 11.6% growth in July. “Recovery in US, stability in Europe and nascent revival of demand in China seems to have supported export growth. Government’s measures to boost exports through sops and interest subvention along with improved competitiveness on account of rupee depreciation are beginning to have a positive impact on India’s export performance," Yes Bank Ltd said in a note on Tuesday.

The bank expects exports to continue rising as farm exports pick up post the arrival of Kharif crop.

Dave from HSBC said dollar demand from oil companies has been taken out of the market by RBI and debt outflows have now settled after dollar sales worth at least $10 billion in the market in the last couple of months.

“From here dealers will look for stability in the rupee, whether that happens at 61 per dollar or 65 per dollar is yet to be seen," Dave said.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 81.937, up 0.17% from the previous close of 81.793.

India’s benchmark Sensex ended at 19,997.10, up 3.77%, or 727.04 points, from the previous close.

Yield on the 10-year bond ended at 8.485%, down 12 basis points from previous close of 8.610%. It had opened at 8.432% and touched a high and a low of 8.517% and 8.409%, respectively.

The call money rate ended at 10.20%, down from Saturday’s close of 35%. It opened at 10.30% and touched a high and a low of 10.40% and 10.20%, respectively.


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