The rupee on Friday bounced back by 47 paise to close at one-week high of 57.51 against the U.S. dollar following strong recovery in local stocks and fresh dollar selling by exporters.
The rupee commenced strong at 57.75 a dollar from last close of 57.98 at the Interbank Foreign Exchange (Forex) market, but fell back to the day’s low of 57.93 on sustained dollar demand from importers.
However, it later rebounded to a high of 57.4525 on rally in domestic equities amid expectations of some positive steps to be taken by the Finance Minister to spur economic growth.
It closed at 57.51, a rise or 47 paise or 0.81 per cent.
Gains would have been larger as FII outflows worth over Rs. 300 crore did not support the local currency’s fight back even as the dollar index was up by 0.21 per cent against a basket of six major global rivals.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: “Rupee traded strong against the dollar taking cues from the strong local equities which closed on a positive note as today inflation data was out and reading was the lowest in more than three years. The trading range for the Spot U.S.D/INR pair is expected to be within 57.00 to 58.00.”
On a weekly basis, the rupee finished 0.78 per cent or 45 paise down, extending the losses to the sixth week.
CRISIL Research said, “The recent slide in the rupee to near 60 per dollar mark has raised eyebrows on all fronts...We believe that the current slide will be temporary and that the rupee will strengthen from current lows.”
Finance Minister P. Chidambaram on Friday said temporary economic problems cannot be solved by “quick-fixes” and the government will continue to take measures with long-term perspective to deal with them. He further said the government will announce steps by the end of this month or next month to boost investment and growth.
Meanwhile, the Indian benchmark S&P BSE Sensex today closed higher by 350.77 points, or 1.86 per cent as slower inflation and strength in rupee revived rate cut hopes.
While the rupee has appreciated from lifetime low of 58.98 hit earlier this week, experts said that the weakening trend in rupee may keep RBI on wait-and-watch mode on Monday.
“...we cannot rule out the possibility that the RBI may decide to delay the rate cut in light of the recent INR weakness. Following this policy rate cut, the room for additional monetary policy easing is limited and we only expect one more rate cut of 25 bps,” said Leif Eskesen, Chief Economist for India & ASEAN at HSBC.
Meanwhile, premium for forward dollar dropped further on sustained receipts by exporters.
Benchmark six-month forward dollar premium payable in November declined to 148-150 paise from overnight close of 152-1/2-154 paise.
Far-forward contracts maturing in May also dipped to 298-300 paise from 305-307 paise.
The RBI fixed the reference rate for the US dollar at 57.7410 and for the euro at 77.0225.
Rupee recovered against the pound sterling to 89.97 from Thursday’s close of 90.85 and also strengthened against the euro to 76.59 from 77.26. It also bounced back against the Japanese yen to 60.59 per 100 yen from 61.60.