The rupee strengthened for the third straight session and gained nine paise against the US dollar on Wednesday, August 4, to settle at 74.19 amid a rally in domestic equities. At the interbank foreign exchange market, the domestic unit opened at 74.16 and registered an intra-day high of 74.08 -rising to its highest level in six weeks. It witnessed a low of 74.24. In an early trade session, the domestic unit gained 16 paise to 74.12 against the greenback. The rupee ended at 74.19, registering a rise of nine paise over its previous close.
On Tuesday, August 3, the domestic unit settled at 74.28 against the dollar. Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, climbed 0.01 per cent to 92.09.
Rupee Hits Its Highest Level In 6 Weeks
During the trading session today, the domestic currency strengthened to a six-week high, tracking sharp gains in domestic equities and inflows towards initial public offerings (IPO), however, bonds stayed largely steady ahead of an interest rate review due later this week by the Reserve Bank of India (RBI). The local unit touched 74.08-74.0925 earlier – its strongest level since June 22.
What analysts say
Mr Amit Pabari, MD, CR Forex:
”In absence of major global triggers, the focus should be on the domestic market. Yesterday, Indian Indices tested historical all-time-highs as Nifty 50 surpassed the 16,000 mark and Sensex rallied by more than 800 points to cross 53,800 levels. After selling more than Rs. 20,000 crore over the last 13 sessions, FIIs have turned positive and invested almost Rs. 2,100 crore yesterday; provisional data suggested.
Broadly, lack of major triggers for the US dollar and steady flows could be positives for the rupee. However, it would be a very interesting day for the pair as RBI which was absent yesterday could try to absorb FII’s flows and keep rupee under pressure. Further, importers could go with a little extra hedge on every correction ahead of an unexpected announcement from the RBI on the liquidity front.
Broadly, the downside seems very much limited for the pair as fundamentals like higher inflation, the expectation of fiscal slippage, disruption in a business activity don’t allow it to appreciate much.”
Kshitij Purohit, Lead International & Commodities at CapitalVia Global Research Limited:
”Due to a drop in the dollar index and a drop in US rates, the USD/INR entered the day little changed from the previous day’s finish. The currency pair is now trading around 74.3000, with the goal of breaking through the 74.30 support level to test the 74.00 strong support level.
The dollar index hit a low of 91.775 on Friday, its lowest level since June 28, and is now trading at 92.02. Investors are now waiting for this week’s US jobs statistics to determine the direction of the dollar. After a key inflation reading came in near economists’ expectations, signaling that inflationary pressures may be easing slightly, the 10-year US yield dipped to 1.18 per cent.”
Domestic Equity Markets Today:
On the domestic equity market front, the BSE Sensex ended 546.41 points or 1.02 per cent higher at 54,369.77, while the broader NSE Nifty climbed 128.05 points or 0.79 per cent to 16,258.80. The equity benchmark indices rallied for the second straight day and closed at record highs, driven by gains in banking and financial services shares.
Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities:
“Bulls continue with the positive momentum as benchmark index Nifty hit another fresh all time high of 16290.20 after a massive breakout. The uptrend was largely supported by the HDFC twins, private banks and financial stocks. Technically, on daily charts the index has formed breakout continuation formation, which is broadly positive for the market.
But intraday charts and momentum indicators suggest a temporary overbought situation and traders may take cautious stance near 16300 -16330 levels. We are of the view that in the next few trading sessions buying on dips and sell on rallies would be the ideal strategy for the day traders.”
According to exchange data, the foreign institutional investors were net buyers in the capital market on August 3 as they purchased shares worth Rs 2,116.60 crore. Brent crude futures, the global oil benchmark, rose 0.01 per cent to $ 72.42 per barrel.