Mumbai: The rupee continued to strengthen against the dollar on the back of announcements by new RBI Governor Raghuram Rajan, rising 77 paise today to close at 65.24, the highest level in almost two weeks.
Dollar sales by exporters, a weak US currency overseas and renewed capital inflows also helped the rupee to gain.
The rupee opened at 66 against the dollar from 66.01 previously at the interbank foreign exchange market and touched a low of 66.32. It bounced back to a high of 65 before settling at 65.24, a rise of 77 paise or 1.17 percent.
The local currency has spurted 239 paise, or 3.53 percent, in three sessions. This was the highest level for the rupee since August 26, when it had closed at 64.30.
Rajan, who took over as RBI chief on Wednesday, had announced steps to attract dollar inflows, including enhanced limits for exporters to re-book cancelled forward exchange contracts and a window to swap foreign currency deposits.
News from the venue of the G-20 Summit in St Petersburg in Russia also appeared to give hope to investors.
The BRICS grouping, including India, yesterday decided to launch a USD 100 billion currency reserve fund to help them navigate through an imminent phase out of the US stimulus.
Separately, India and Japan today expanded their currency swap arrangement to USD 50 billion from USD 15 billion.
"One important step for the rupee was taken at the G-20 summit where India and Japan have extended their existing currency swap facility," said Abhishek Goenka, CEO of India Forex Advisors. "This will enable our country to defend the exchange rate."
The RBI's liquidity-tightening measures may be rolled back by October as market sentiment and the rupee are expected to improve, Barclays said. The fresh RBI steps are likely to raise the possibility of better forex inflows in the next three months, it said.
The rupee helped stocks to rise, with the benchmark Sensex climbing 290.30 points or 1.53 per cent. FIIs injected a net Rs 1,101.41 crore into shares yesterday, as per provisional stock exchange data.
The dollar index was trading 0.04 percent lower against a basket of six major global rivals.
"The market is reacting positively to steps taken by the new Governor, but the key would be the government's intent in addressing the current account deficit and subsidy burden," said Pramit Brahmbhatt, CEO of Alpari Financial Services (India). "The trading range for the spot USD-INR pair is expected to be within 64.80 to 66.30."
Forward dollar premiums bounced back on fresh payments from banks and corporates.
The benchmark six-month forward dollar premium payable in February shot up to 248-253 paise from 229-1/2-234-1/2 paise previously. Far-forward contracts maturing in August jumped to 440-1/2-447-1/2 paise from 410-415 paise.
The RBI fixed the reference rate for the dollar at 65.9600 and for the euro at 86.5828.
The rupee flared up to 101.66 against the pound from 103.29 previously and rallied to 85.55 per euro from 87.18. It firmed up against the Japanese yen to 65.44 per 100 yen from 66.08.
The forex and money markets will be closed on Monday on account of Ganesh Chaturthi.
First Published: Friday, September 6, 2013, 18:40