Rupee rises1.56% this week; closes at 53.45 Vs US dollar
Mumbai: Continuing its northbound journey for the third straight week, the rupee ended up by another 85 paise at over four-month high of 53.45 against the Greenback during the shortened week under the review on sustained rally in local equities amid dollar selling by exporters and some banks.
The Forex market was closed on September 19, 2012 for observing "Ganesh Chaturthi".
Robust capital inflows amid weak dollar overseas also boosted the rupee sentiment, a forex dealer said.
On Monday, the Reserve Bank of India (RBI) in its mid-quarter monetary policy review cut the cash reserve ratio (CRR) by 0.25 percent, releasing nearly Rs 17,000 crore into the system while kept the key lending (repo) and borrowing (reverse repo) rates unchanged to contain the high inflation.
At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed sharply higher at 53.80 a dollar from last weekend's close of 54.30 and moved in a range between a high of 53.33 and a low of 54.42 before concluding the week at 53.45, showing a rise of 85 paise or 1.56 percent. In straight three week, the rupee has gained 207 paise or 3.72 percent.
The Indian benchmark sensex also extended its gains for the third straight week and closed up by nearly 289 points or 1.56 per cent on host of positive factors.
Exporters and some banks also sold dollars on hopes that the dollar value will come down in overseas markets on reports that Spain and European officials were working together on a plan for economic reforms.
The buying in favour of rupee also received a boost after Finance Minister P Chidambaram cut withholding tax on overseas borrowings to 5 percent from 20 percent, a move expected to bridge current-account shortfall that previously fuelled the slide in rupee.
Foreign Institutional Investors (FIIs) pumped in almost USD 630 million in the first three trading sessions of the week, which mainly supported the rupee rise.
"The statement of the Samajwadi Party to continue support to UPA-II along with steps regarding withholding tax in case of borrowing through ECB route supported the sentiment," said Hemal Doshi, Currency Strategist, Geojit Comtrade.
Meanwhile, the Consumer Price Index (CPI) rose to double digits at 10.03 percent in August from 9.86 percent in July on soaring vegetable prices.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) Pvt Ltd said," The INR carried the strengthening momentum of the previous week and continued to rise in the current week too.
"The domestic fundamentals continued to dominate the headlines as global economic calendar was very light after heavy events in the week. The last weekend diesel price hike and restriction on cooking gas induced some sharp gains which was immediately followed by FDI in multi-brand retail, aviation and restructuring of debt in power sector."
"The policy reforms agenda of the government went for a spin after the governments strongest ally decided to pull out of the government but extending its support from outside. The markets initially eased from high as there was stiff opposition from the other allies too, but the firm stance of the government and the cut of the withholding tax to 5 percent from 20 percent and also on to the dollar loans increased in quantum of capital inflows," he added.
"The government's commitment to go ahead with its policy reforms in insurance and the capital markets continued to raise the capital flows pulling the domestic equity markets over a year's high.
"The equity markets also registered their single largest day gains of the year and all this happened in the month which is considered as inauspicious or a bad month for Indian equity markets as per the history of last twenty years," he further commented.
"The surprise CRR cut by RBI turned out to be weakening for INR as the markets expected the RBI to stop its Open market operations but the policy reforms form the government and a firm stance by not bowing to the pressures of allies attracted the attention of cash rich investor.
"The sharp rise in capital inflows is expected to continue in the coming week too on back of the reforms agenda of the government. The crucial levels for INR appreciation are 52.50 levels and for depreciation the 54.30 levels can be closely watched as rise above 54.30 levels shall weaken the rupee till 55.00 levels," Goenka said.
The RBI fixed the reference rate for US dollar and euro at Rs 53.9055 and Rs 70.0095 from Rs 54.7270 and Rs 71.3415 last weekend, respectively.
The rupee premium for the forward dollar remained weak on continued receipts by exporters.
The benchmark six-month forward dollar payable in February ended bearish at 140-1/2-142-1/2 paise from last weekend's close of 157-159 paise and far-forward contract maturing in August also dropped further to 286-288 paise from 307-309 paise last weekend.
The rupee shot up further against Pound Sterling to end the week at 86.93 from preceding weekend's level of 88.11 and also flared up against the Japanese yen to 68.37 per 100 yen from 69.63.
However, it bounced back sharply against the euro to 69.35 from last weekend's close of 71.15.