The rupee took a breather after a spectacular overnight rally and ended little changed at 63.69 — its highest level in 2-years — as RBI intervention in the foreign exchange market mopped up excess dollar liquidity.
Despite a strong start to trade, the home currency relinquished its strong initial gains towards the fag-end trade to end almost flat.
Stamping its best single-day rise this year, it had surged 37 paise to breach the psychological 64-level yesterday.
The local unit touched a fresh 2-year high of 63.56 in early trade following frantic dollar unwinding by exporters and currency speculators as well as short selling.
However, the RBI intervened in the market through state-run banks and capped the steep rise.
Flurry of capital inflows predominantly smart-money into the stock market were a key driver of the rupee’s rise at this juncture on “better prospects” of economic growth as compared to other emerging markets aided by steady progress in monsoon and good corporate earnings, a forex dealer commented.
With the latest inflow, total investment in the capital markets (equity and debt) has reached ₹1.74 lakh crore (USD 26 billion) this year.
The rupee has been on a roll since the beginning of this year, appreciating over 6 per cent against the dollar.
In the meantime, the Reserve Bank yesterday cut the repo rate by 25 basis points to 6 per cent, but pinned future action on more economic data and inflation outlook.
The domestic unit opened higher at 63.67 from Wednesday’s closing value of 63.70 at the Interbank Foreign Exchange market and shot-up to hit fresh multi-year high of 63.56 mid-morning trade.
It later traded in tight range with extreme caution, but gradually fell back toward the fag-end trade to hit an intra-day low of 63.71 before settling at 63.69, showing a mere gain of 1 paisa.
The RBI, meanwhile, fixed the reference rate for the dollar at 63.6314 and for the euro at 75.3905.
In cross-currency trades, the rupee strengthened further against the pound sterling to finish at 83.75 from 84.27 per pound, but retreated against the Euro to end at 75.44 from 75.35 yesterday.
The home unit also drifted back against the Japanese yen to conclude at 57.67 per 100 yens from 57.52.
In worldwide trade, the dollar traded marginally positive against the other major currencies amid doubts about whether there will be another US interest rate rise this year.
The dollar index, which measures the greenback’s value against a basket of six major currencies, rose about 0.04 per cent to 92.79.
Elsewhere, the British Pound advances against the greenback to fresh 2017 highs just hours ahead of the BOE’s monetary policy outcome.
In forward market today, premium for dollar dropped further owing to sustained receivings from exporters.
The benchmark six-month premium payable in January declined to 139-141 paise from 143-145 paise and the far forward July 2018 contract also slipped to 275-277 paise from 285-287 paise from 293-295 paise yesterday.
On the International commodity front, crude prices rebounded after a brief fall on Thursday, supported by signs of a tightening US market but weighed down by ample supplies from OPEC producers.
Brent crude futures, the international benchmark for oil prices, were trading up 16 cents at USD 52.52 per barrel in early Asian trade.
