Ru­pee Gains More Strength, Strong Macro Data Adds to Cheer

The Economic Times - - Markets: Beating Volatility - Saikat.Das1@ times­ Mar­ket In­tel­li­gence

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

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