Rupee rebounds from record low, spurts 10 paise to 77.68 vs USD

Mumbai: Recovering from its lifetime low, the rupee advanced 10 paise to settle at 77.68 against the US dollar on Wednesday after the RBI raised the interest rate by 50 basis points to tame inflation.

However, elevated oil prices and persistent foreign capital outflows capped the gains, forex dealers said.

At the interbank forex market, the local unit opened strong at 77.70 against the greenback and witnessed an intra-day high of 77.64 and a low of 77.79. It finally settled at 77.68, up 10 paise over its previous close.

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The rupee had slumped to its lifetime low of 77.78 on Tuesday.

The Reserve Bank of India (RBI) on Wednesday raised the key interest rate by 50 basis points, the second increase in five weeks, to rein in the rise in prices that it saw continuing to hurt consumers in the near term.

The rate hike comes on the back of a 40 bps increase effected by the RBI at an unscheduled meeting on May 4.

On the domestic equity market front, the BSE Sensex ended 214.85 points or 0.39 per cent lower at 54,892.49, while the broader NSE Nifty slipped 60.10 points or 0.37 per cent to 16,356.25.

The dollar index, which measures the greenback’s strength against a basket of six currencies, rose 0.20 per cent to 102.52.

Brent crude futures, the global oil benchmark, rose 0.96 per cent to USD 121.73 per barrel.

Foreign institutional investors remained net sellers in the capital market on Wednesday, offloading shares worth Rs 2,484.25 crore, as per exchange data.

Meanwhile, the RBI retained its GDP growth forecast at 7.2 per cent for the current fiscal but cautioned against negative spillovers of geopolitical tensions and a slowdown in the global economy. It also upped the inflation projection for the current fiscal to 6.7 per cent from the 5.7 per cent forecast in April.

“For the forex market, RBI’s policy decision remains a non-event as the rupee traded in a narrow range with thin volumes…Spot USD/INR started at 77.70, almost flat but it strengthened throughout the day following risk-averse sentiments, soaring crude oil prices and a firmer dollar index.

“Continued broad-based USD demand amid the broad decline in riskier assets also weighed on Rupee,” said Dilip Parmar, Research Analyst, HDFC Securities.

A recent rally in oil prices, with Brent touching USD 120 per barrel once again, also pushes inflation higher and will keep the central bank firmly on the path of tightening, he added.

Spot USD/INR is expected to give an upward breakout in the coming days towards the 78 level while support shifts to 77.50, according to Parmar.

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