The rupee on Friday posted its best gain against the dollar in five years as it appreciated 101 paise or 1.36% to end the day at 72.45 a dollar as compared with the previous close of 73.45.
A combination of factors like ebbing global crude oil prices and a possible U.S.-China trade deal led to the strengthening of the rupee.
“A confluence of factors helped the sharp uptick in rupee today. Falling crude prices, better global risk appetite on U.S.-China trade-related hopes and broad dollar weakness helped the currency. This is the biggest single day gain for the rupee since early September of 2013,” said Madhavi Arora, economist, FX and rates- Edelweiss Securities Ltd.
Rupee was the best performing emerging market currency on Friday after Korean won which appreciated 1.45%. Brent crude, the international benchmark, was trading at $72.98 per barrel.
Falling crude prices will help bridge the current account gap, which is seen a positive for the rupee.
The future trajectory of the rupee could be decided by several external factors, including Brent prices and the mid-term polls in the U.S.
PTI adds..
At the Interbank Foreign Exchange (Forex) market, the domestic unit Friday opened on a higher note at 73.14, then gained further ground and touched an intra-day high of 72.43, a jump of 102 paise. It, however, closed at 72.45 against the greenback, showing a rise of 100 paise — the best day for the Indian unit since September 2013.
With crude oil prices constantly dipping, concerns over widening current account deficit have slightly eased, helping the rupee claw back some lost ground.
The reports have suggested that the Trump administration is considering granting waivers to India and some other countries, which will allow these nations to continue buying oil from Iran, despite the renewal of US sanctions from next week.
The US had told various countries, including India, to cut oil imports from the Persian Gulf nation to “zero” by November 4 or face sanctions.
“Broad-based weakness in dollar along with fall in crude oil prices boosted the Indian rupee, which climbed 1.40 per cent to 72.44. Local currency had a single biggest day gain in five years amid improvement in macro environment. Foreign funds have turned buyer in domestic equity and debt market,” an analyst said.
Brent crude, the international benchmark, was trading at USD 72.98 per barrel.
“Crude oil traded near seven-month lows pressured by higher output from major oil producers... Brent crude has corrected 17 per cent from its recent high of 86.74 registered on October 3,” the analyst noted.
Meanwhile, foreign funds on a net basis bought shares worth ₹348.75 crore from the capital markets on Thursday, while domestic institutional investors sold shares worth ₹509.17 crore, provisional data showed.
Market benchmark Sensex soared almost 580 points to end at a one-month high of 35,011.65 on Friday. The NSE Nifty leaped 172.55 points, or 1.66%, to 10,553.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 72.8798 and for rupee/euro at 83.2292. The reference rate for rupee/British pound was fixed at 94.7530 and for rupee/100 Japanese yen at 64.47.
