The rupee recovered modestly by eight paise to close the week at 62.04 against the greenback following strong rebound in local equities amid increased capital inflows, despite US Fed’s decision to taper its stimulus.
The dollar selling by exporters and some banks exceeds dollar demand from importers, which also supported the rupee rise.
The local currency closed strong on the first day of the week and later showed weak trend for three straight day on hopes of US Federal Reserve will start tapering of its bond buying programme, which was later proved to be right.
US Federal Reserve Wednesday night decided to reduce its monthly stimulus by USD 10 billion from January next year.
However, it outweighed the RBI’s surprise status quo decision on all key interest rates as it was already factored in and the rupee rebounded on Friday.
At the Interbank Foreign Exchange (Forex) market the rupee commenced slightly lower at 62.15 a dollar from last weekend’s close of 62.12 and immediately touched a high of 61.73, amid indications the RBI had stepped in to support the domestic unit after a spate of weak economic data.
Later, it fell back to a low of 62.48 before recovering smartly to settle at 62.04, showing a rise of eight paise or 0.13 percent. Last week, it had tumbled by 71 paise or 1.16 percent.
The Indian benchmark Sensex spurted by 364.14 points or 1.76 percent during the week while FIIs infused USD 835.21 million in the first four days of the week, as per Sebi data, which mainly helped the rupee recovery.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) Pvt Ltd, said, “USD-INR pair traded side-ways last week, but for it appreciated slightly as on Wednesday RBI surprised the investors by living the rates unchanged despite of high retail and wholesale price inflation.”
“RBI Governor Raghuram Rajan stated they are waiting for more data to remove uncertainty in the financial market to look at the clear picture and will calibrate monetary policy primarily to target inflation in an environment where growth is weak. The government is also firm on achieving fiscal deficit target for 2014 and thinks India is in better position if Fed taper takes place. The trading range for the spot USD/INR pair is expected to be within 61.50 to 63.00,” he added.
The rupee premium for the forward dollar declined sharply on fresh receipts by exporters.
The benchmark six-month forward dollar premium payable in May fell to end at 229-1/2-231-1/2 paise from last weekend’s close of 246-248 paise and far-forward contracts maturing in November also dropped to 466-1/2-468-1/2 paise from 489-491 paise.
The RBI fixed the reference rate for the US dollar at 62.2420 and for the euro to 84.8774 from 62.1266 and 85.4135 last weekend, respectively.
The rupee remained weak against the pound sterling to 101.34 from last weekend’s close of 101.14, while recovered smartly against the euro to 84.70 from preceding weekend’s close 85.31.
However, it hardened further against the Japanese yen to 59.41 per 100 yen from previous weekend’s close of 59.92.
PTI