Mumbai: The rupee continued its north-bound journey for the fourth week in a row and appreciated by 49 paise to end the week at an over three-an-a-half-month high of 53.19 against the US currency, following sustained dollar selling by exporters amid key policy rates cut by the apex bank.
Consistent foreign funds inflow in local equities also boosted the rupee sentiment while weak domestic stocks capped the rise to some extent, a forex dealer said.
The Reserve Bank of India (RBI) in its third quarter monetary policy on Tuesday cut its short-term lending rates and cash reserve ratio (CRR) by 25 basis points each to improve the sagging economy, but showed concerns over the headline inflation and fiscal as well as trade deficit.
At the Interbank Foreign Exchange (Forex) market, the local currency resumed weak at 53.85 a dollar from last weekend's close of 53.68 and touched a low of 53.97 on Tuesday on dollar demand from importers, mainly oil refiners, to meet their month-end requirements.
Later, when the RBI cut the lending rates and CRR as also fresh dollar selling by exporters helped the rupee to bounce back to a high of 53.07 before concluding the week at 53.19, showing a rise of 49 paise, or 0.91 percent. In straight four weeks, it has spurted by 188 paise, or 3.41 percent.
The Indian benchmark Sensex closed the week sharply down by 322.34 points, or 1.60 percent, while FIIs pumped in USD 766.49 million in the first four days of the week, as per Sebi data.
Weak dollar overseas also aided the rupee rise.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "The INR started the week on a weak note extending the weakness on second day after which it regained most of the lost ground and was lower towards the end with some marginal bounce back".
"The Reserve Bank of India (RBI) slashed its key policy (repo) rate by 25 bps to 7.75 percent in its Q3 monetary policy. Consequently, the reverse repo rate too decreased to 6.75 percent. At the same time, RBI cut the cash reserve ratio (CRR) or the portion of deposits banks keep with RBI, by 25 bps to 4.00 percent.
"The CRR cut will inject Rs 18,000 crore of additional liquidity into the system. It revised India's GDP forecast to 5.5 percent in 2012-13 as against 5.7 percent estimated earlier. The RBI displayed more concerns of Inflation and stressed the need for more policy reforms by the government to support growth in economy," Brahmbhatt added.
The S&P commenting on receding chances of a sovereign investment downgrade on India after the series of policy reforms since September has been positive for the market which witnessed a partial roll back of weakness in rupee.
The government in its trade shows has been assuring markets of a good budget and commitment to lower the twin deficits has been inducing strengths in the local unit. The 53.00-52.50 levels shall be hard nut to crack upon and even if it does then will not sustain above the same for long.
"Targeting 53.00 levels Or a rise 53.00 - 52.80 levels can be used as a selling opportunity with a stop loss near 52.50 levels targeting 53.80 - 54.00 levels whichever side the market triggers first. Strong support is placed at 53.20 - 52.90 levels whereas resistance is pegged at 53.70 - 53.90 and 54.25 levels," Brahmbhatt further said.
The RBI fixed the reference rate for US dollar and euro at 53.3238 and 72.6296 from 53.8515 and 71.7210, respectively last weekend.
The rupee premium for the benchmark six-month forward dollar payable in July closed the week at 184-186 paise.
Far-forward contracts maturing in January ended at 345-347 paise.
The rupee firmed up further against Pound Sterling to end the week at 84.17 from preceding weekend's level of 84.95 and also bounced back against the Japanese Yen to finish at 57.75 from last weekend's level of 59.94.
However, it fell back sharply against the Euro to close at 72.60 from last weekend's level of 71.54.