Gains 65p, but rising trend may not last

The rupee on Wednesday closed 65 paise stronger, as investor appetite for emerging market assets improved after the US treasury yields continued to cool off and weakened the dollar globally. However experts said that further appreciation of the rupee will be limited due to the hardening of the US 10-year yields.

Sriram Iyer, senior research analyst, currency and commodities, Reliance Capital, said, "The rupee has been appreciating for the last two-three sessions due to corporate dollar and portfolio inflows in our equity markets, but this appreciation could be limited due to expectation of further hardening of the US treasury yields as the market is factoring good economic outlook supported by the US government stimulus plan and steps taken by the US Federal Reserve to support the economy."

"The 10 year US yields, which is at 1.4 per cent right now, could harden to 1.8 per cent which will support the US dollar, and if that happens, the rupee would weaken. In the short-term 72.50 will remain a key support for the USD-INR pair while on the upside 73.25 will remain a key resistance point," added Iyer.

The US Fed will be worried if the US yields harden further as it wants to pump money at lower rates, added Iyer.

At the interbank forex market, the local unit opened at 73.26 and after hitting an intra-day high of 72.71 and a low of 73.26, finally settled at 72.72 against the dollar.