Mumbai: Keeping its bullish wave intact, the rupee on Thursday soared to a near 20-month high of 64.52, firming up by another 35 paise against the US dollar on massive unwinding of the American currency by exporters amid buoyant growth outlook by the Reserve Bank.
Overall forex market sentiment witnessed a sudden revival of enthusiasm after the RBI today projected India’s growth to strengthen for the current fiscal at 7.4 per cent, up from 6.7 per cent in 2016-17.
The apex bank, however, left its benchmark lending rate unchanged at 6.25 per cent for the third monetary policy review in a row, citing upside risk to inflation.
It, however increased the reverse repo rate at which it pays to lenders by 0.25 per cent to 6 per cent, narrowing the policy rate corridor.
Today’s close is the highest for the rupee since August 11, 2015 — when it had ended at 64.19 against the US dollar.
Sluggish domestic equities and extreme volatility ahead of the policy outcome added some discomfort for the rupee trade initially before the incredible recovery towards the fag-end.
The Indian rupee has a lot of positive factors supporting its outlook at this juncture and likely to outperform in the region driven by government’s economic policy initiatives alongwith heavy capital inflows, a forex trader commented.
After resuming sharply lower at 65.05 compared to Wednesday’s close of 64.87, the home unit largely traded in a narrow range amid caution ahead of the RBI meet.
However, the rupee staged a resounding comeback in later afternoon deals to hit a fresh intra-day high of 64.50 before ending at 64.52, revealing a solid gain of 35 paise, or 0.54 per cent.
It recouped 16 paise yesterday after a brief dip. The RBI, meanwhile, fixed the reference rate for the dollar at 64.9791 and for the euro at 69.3912.
Domestic equities ended marginally lower amid profit-taking after record closing overnight, though the RBI policy outcome revived overall trading sentiment, limiting sharp early losses.
In cross-currency trade, the rupee also hardened against the pound sterling to close at 80.40 from 80.97 per pound and maintained its upbeat momentum against the euro to settle at 68.86 compared to 69.26 earlier.
The local currency also rebounded against the Japanese Yen to finish at 58.14 per 100 yens from 58.53 yesterday.
In worldwide trade, the dollar regained the ground lost after FED’s minutes amid caution ahead of key events later today and tomorrow, including Donald Trump-Xi Jinping meeting, and the US Nonfarm Payroll report.
The euro fell sharply in early European trading after both European Central Bank President Mario Draghi and ECB’s Chief Economist Peter Praet gave speeches that the markets interpreted as dovish.
The dollar index, which tracks the US currency against a basket of six major rivals, was higher at 100.52.
In the forward market today, premium for dollar maintained its upbeat trend owing to sustained paying pressure from corporates.
The benchmark six-month premium for September edged up to 156-158 paise from 155-157 paise and the far-forward March 2018 contract also firmed up to 311-313 paise from 306.5-308.5 paise on Wednesday.