Rupee Gains More Strength, Strong Macro Data Adds to Cheer
Mumbai: The rupee has strengthened against the dollar as domestic growth concerns were allayed, renewing investor confidence. The rupee is now the seventh best-performing emerging market currency compared to 18th a month ago. The local currency appreciated 0.8% this week itself, reversing a weakening trend due to a stronger dollar supported by the US economy.
The rupee rose 16 paise, or 0.24%, to close at 64.93 against the dollar, the strongest level in more than three weeks and its fifth consecutive day of gains.
“The latest macro data, coupled with RBI and government commentary, have helped investors gain confidence in the currency market,” said Anindya Banerjee, an analyst at Kotak Securities. “While we see unwinding of long positions on the dollar, market sentiment has again changed in favour of the rising rupee.”
The dollar has also started showing signs of weakness with fading Trump reform plans, he said.
In terms of total returns, the exchange rate adjusted for interest rates, the rupee has yielded 0.79% in October compared with -1.6% in September, according to data from Bloomberg.
The Reserve Bank of India likely intervened in the currency market because some state-owned banks bought dollars, dealers said. This checked the rupee’s advance and erased some of its early gains. During the day, the rupee hit a high of 64.87.
“Without central bank intervention, the rupee would have appreciated more,” said a trader from a foreign bank.
The dollar index, which measures the unit against six other major currencies, fell 0.85% in the past seven trading sessions.
Retail inflation in India eased to 3.3% in September, well below the average market expectation. This has fuelled hopes of an interest rate cut of at least 25 basis points before the financial year ends on March 31, 2018. India’s trade deficit narrowed to $8.98 billion in September, the government said on Friday. HIGHS & LOWS