Rupee rallies 29 paise to end at nearly 12-week high on dollar inflows

The rupee strengthened further by 29 paise to close at a nearly 12-week high of 73.00 against the US dollar on Tuesday, marking its fourth straight session of gain following a firm trend in domestic equities and foreign fund inflows.

At the interbank forex market, the local unit opened higher at 73.26 against the greenback and later breached the 72 level in day trade after strong gains in equity markets.

The local unit moved in a range of 72.99 to 73.29 before settling at 73.00, the highest closing level since June 9. The rupee has spurted by 124 paise against the dollar in four straight sessions to Tuesday.

"The Indian rupee appreciated against the dollar supported by dollar inflows, absence of the Reserve Bank of India's intervention in the spot market and dovish comments by Federal Reserve Chairman Jerome Powell," said Sriram Iyer, Senior Research Analyst at Reliance Securities.

The unit rose 1.9 per cent in August, its biggest gain since May and tracked Asian and emerging market currencies this month.

The Thai baht rallied 1.9 per cent, while the Malaysian ringgit and Singapore dollar appreciated 1.5 per cent and 0.5 per cent, respectively, in August, Iyer said

Dilip Parmar, Research Analyst, HDFC Securities, also said that the rupee became the best performing currency among Asian currencies following rebound in economic activities along with huge foreign fund inflows.

Markets are pricing continuation of inflows from foreigners after regulatory curb by the Chinese government. Apart from speculative inflows, FDI inflows are also supporting the local currency, Parmar said.

"Spot USDINR is expected head towards June low of 72.32 once the level of 72.74 breaches while on higher side 73.64 becomes the strong resistance," he added.

According to Jateen Trivedi, Senior Research Analyst at LKP Securities, the rupee kept its upstream on the back of strong capital market performance.

"The softness in crude and Dollar index also kept the pressure on USDINR helping the rupee scale higher. With strong vaccination drive in India and the economy opening strongly pushed the prices higher. Going ahead range for the rupee can be seen between 72.75-73.25," Trivedi said.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading down 0.12 at 92.54. Brent crude futures, the global oil benchmark, fell 0.83 per cent to USD 72.80 per barrel.

On the domestic equity market front, the BSE Sensex ended 662.63 points or 1.16 per cent higher at a lifetime high of 57,552.39, while the broader NSE Nifty advanced 201.15 points or 1.19 per cent to a record closing of 17,132.20.

Foreign institutional investors were net buyers in the capital market on Monday as they purchased shares worth Rs 1,202.81 crore, exchange data showed.