The rupee continued its winning streak for the fourth straight session and gained 29 paise against the US dollar on Tuesday, August 31, to settle at 73 (provisional), tracking a bullish trend in domestic equities and sustained foreign fund inflows. At the interbank foreign exchange market, the domestic unit opened at 73.26 against the dollar and swung between 72.99 to 73.29 during the trading session. In an early trade session, the local unit rose four paise to 73.25 against the greenback. The rupee gained momentum later and settled at 73 – its highest level since June 11, and greater by 29 paise against its previous close.
The rupee has moved higher by 124 paise against the dollar in four straight sessions to Tuesday. Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading down 0.12 at 92.54.
What analysts say:
Mr Amit Pabari, MD, CR Forex:
”Today, the focus will be on Q1 FY 22 GDP data, which is expected to rise by 21 per cent YoY, albeit due to low base effect and could not be impactful for the market.
The rising equities amid weak FII investment and a jump in COVID cases could be negatives for the rupee in the near term. The 1/- fall in the USDINR pair over the last two trading sessions doesn’t justify any shift in fundamentals. It is just that RBI had let the market react on a free-float basis. This could be an opportunity for them to make a comeback and pile up their reserves to increase their hedges against hot inflows.”
Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities:
”The rupee against the dollar witnessed three back-to-back days of losses. The spot rupee closed 26 paise lower at 73.00, the lowest level since 10th June 2021. A mix of rising FPI flows in debt, lumpy corporate flows, and soft US dollar overseas is adding the downside pressure on the pair.
We continue to be bearish as risk-on sentiment in global markets can push USDINR lower towards 72.50/60 levels. RBI is allowing rupee to appreciate in line with its peers in Asia. However, over the past one month, USDINR has seen low volatility and at the same time, Rupee liquidity has ballooned to over 11 lakh crore. A combination of these two may have prompted RBI to allow USDINR to drift lower.”
Kshitij Purohit, Lead International & Commodities at CapitalVia Global Research Limited:
”If the RBI does not intervene, the currency pair has room to fall to the 73.50 level before bouncing back. Before any further news of Fed tapering, which is not expected in the short future, the rupee could stay in the consolidated band of 73.30 to 74.30.
The Reserve Bank of India appears to be forgiving enough to enable the rupee to soar above the 74.00 resistance level. Supply problems, combined with rising Brent crude prices above $ 70/barrel, could limit the rupee’s gains beyond the 73.30 level.”