RU­PEE HITS 16-MONTH HIGH ON HOPES OF CAP­I­TAL INFLOWS

Business Sphere - - IN THE NEWS -

The ru­pee surged to 16-month high of 65.69 per dol­lar on hopes of cap­i­tal inflows and strong gains in equity mar­kets post the BJP's stel­lar show in state polls. The ru­pee closed at 65.69 per dol­lar on March 15, ex­tend­ing its strong gains for sec­ond day of the week as ex­porters ag­gres­sively off­loaded the US cur­rency ahead of the Fed meet out­come. The do­mes­tic cur­rency had gained a mas­sive 78 paise to end at a nearly one­and- a-half year high of 65.82 against the US dol­lar on March 14. This was the high­est clos­ing of the ru­pee since Novem­ber 6, 2015 when it had ended at 65.76. Mas­sive cap­i­tal inflows on hopes of more re­form mea­sures fol­low­ing BJP's strong show­ing in the re­cently held state elec­tions spurred the ru­pee's big­gest rally since early 2015. The do­mes­tic cur­rency has risen 2.23 per cent since the be­gin­ning of the year. Forex market sen­ti­ment soared on hopes that BJP's stel­lar show in state polls would pave the way for the Modi govern­ment to fo­cus on key re­form mea­sures. The BJP's thump­ing vic­tory in Ut­tar Pradesh and sub­stan­tial gains made in other states will fa­cil­i­tate re­forms as the rul­ing party inches closer to a ma­jor­ity in the Ra­jya Sabha, Moody's In­vestors Ser­vice said. On the global front, the green­back traded lit­tle changed against ma­jor coun­ter­parts ahead of in­ter­est rate de­ci­sion from Fed­eral Re­serve even as in­vestors' awaited cues on the cen­tral bank's fu­ture mone­tary pol­icy. The much-an­tic­i­pated turn­around on the eco­nomic front has opened up a bar­rage of for­eign cap­i­tal fund flows into In­dia. For­eign in­vestors pumped in over Rs 10,000 crore in the In­dian cap­i­tal mar­kets this month so far. Bullish macro data, which showed that the coun­try's in­dus­trial pro­duc­tion bounced back in Jan­uary, ex­pand­ing by 2.7 per cent year-on-year, and ex­ports grow­ing at five-year rate in Fe­bru­ary is also su­port­ing the ru­pee climb. Global rat­ing agency Fitch has said the In­dian econ­omy will grow by 7.1 per centin the cur­rent fis­cal be­fore step­ping up to 7.7 per cent in the next two fi­nan­cial years.

In the week to March 10, the ru­pee had staged a stun­ning re­bound and pow­ered ahead to end at 66.60 against the dol­lar on sus­tained sell­ing of the US cur­rency by banks and ex­porters. The do­mes­tic cur­rency largely with­stood ini­tial lack­lus­tre per­for­mance and a shift to much more hawk­ish Fed with ag­gres­sive rate hikes priced in for this year. Though the over­all eco­nomic out­look for the US re­mained fairly buoy­ant spec­u­la­tors are bet­ting on the Fed rais­ing US in­ter­est rates be­yond March.

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