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The rupee strengthened on Monday, owing to dollar flows into equity markets by foreign institutional investors (FIIs). It recorded the highest single-day gain in about seven weeks.
On Monday, the rupee ended at 62.42/dollar, compared with Thursday’s close of 63.12 a dollar. It had opened at 62.86/dollar and during intraday touched a high of 62.38/dollar and a low of 62.91 a dollar in intra-day trade. On Friday, the market was closed on account of Muharram.
On November 7, too, the rupee had closed at 62.42 a dollar.
“Today (Monday), the equity market rallied, due to which there were foreign flows. This helped the rupee and it would stabilise from here. The rupee also saw support from foreign flows into the equity market. The overall domestic climate has not changed, due to which the rupee may not strengthen beyond 62 a dollar in the near term. It may trade at 62-62.8 a dollar,” said N S Venkatesh, chief general manager and head of treasury, IDBI Bank, and chairman of the Fixed Income Money Market and Derivatives Association of India.
Last week, Janet Yellen, US President Barack Obama’s nominee for the post of chairperson, US Federal Reserve, had said she would continue the central bank’s stimulus package until she saw improvement in the US economy. Reserve Bank of India Governor Raghuram Rajan has assured now, India was better prepared to face tapering of the US central bank’s bond-buying programme.
Experts said dollar demand for defence-related payments may exert some pressure on the rupee. “On a certain day in the near term, defence-related dollar demand may come into the market, and the rupee will be under pressure. The movement of the rupee depends on dollar flows,” said the head of treasury of a large state-run bank. Month-end dollar demand from importers is expected soon, due to which the rupee isn’t estimated to rise above the 62-a-dollar mark.
