New Delhi: Rupee continued to outshine against the beleaguered US dollar and ended at a fresh 16-month high of 65.46 on the back of frantic dollar unwinding by banks and exporters amid dovish outlook by Fed on future rate hikes.
It’s been an action packed week for the forex market as overall sentiment undergone a sea change in the interim on hopes that the government will accelerate its reform agenda tracking the BJP’s sweeping victory in in Uttar Pradesh and Uttarakhand elections.
The four-day stratospheric rise strengthened the domestic currency by a whopping 114 paise against the USD. 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.
A spectacular rally in domestic equities which helped the 50-share broder Nifty to close at all-time high levels lending further support to rally.
It also got an added fillip from bullish macro data, which showed that the country’s industrial production bounced back in January, expanding by 2.7 per cent year-on-year.
Lesser-than-anticipated hawkish monetary policy stance too weighed on trade.
The home currency resumed on a strong footing at 66.20 from last Friday’s closing value of 66.60 at the Interbank Foreign Exchange (forex) market on heavy dollars selling from speculative traders, tracking weekend developments.
Maintaining its ascending triangle, the home unit hit a fresh high of 65.21 on Wednesday despite suspected RBI’s intervention to curb speculative trades.
It finally settled the week on a buoyan note at 65.46, revealing a solid gain of 114 paise, or 1.71 per cent – stretching the gains for the fourth-straight week.
The much-anticipated turnaround on the economic front has opened up a barrage of foreign capital fund flows into India.
In the just four sessions Foreign funds and overseas investors have pumped in USD 1085.47 million during the week, while they pumped in over Rs 10,000 crore in the Indian capital markets this month so far.
On the global front, the greenback remained under immense pressure and slipped to a five-week low spooked by fading expectations of a series rate increases by the US Federal Reserve despite fairly buoyant macro economic outlook.
The US Federal Reserve dominated the week’s proceedings as its open market committee delivered a widely expected 25 basis point rise in interest rates but maintained its forecasts for the gradual pace of monetary tightening
policy this year and next.
The dollar index a measure of the US currency against a basket of peers ended sharply lower at 100.14 from 101.38 – its biggest weekly loss since last November.