LM:Rupee rises to 10-month high against dollar; closes 38 paise stronger
Mumbai: The rupee rose to a 10-month high against the dollar due to consistent dollar sales by exporters and on expectations that dollar inflows from foreign institutional investors (FIIs) will continue.
The rupee closed at 59.29 per dollar, up 0.64% against its previous close of 59.67 per dollar. The currency opened at 59.51 per dollar earlier on Thursday and strengthened to 59.095 per dollar.
The local currency market was closed on Wednesday.
Harihar Krishnamoorthy, treasurer at FirstRand Bank Ltd, said positivity about the recovery in the macroeconomic situation has been supported by expectations on inflows from FIIs.
“The recent comments by European Central Bank president Mario Draghi, which hinted at further liquidity easing measures when the bank meets in June, has helped the rupee. Now expectations are that the Indian currency will inch up towards 59 per dollar,” Krishnamoorthy said.
After the ECB meeting on 8 May in which the central bank voted to keep rates unchanged, Draghi said the bank could act “next time”, implying a likely infusion of liquidity.
“The governing council is comfortable with acting next time, but before that we want to see the staff projections that will come out in early June,” Draghi said at a press conference in Brussels after the policy decision was announced. “There wasn’t a decision today. It’s a preview of the discussion we will have next month.”
FIIs have already invested $1.65 billion in both the debt and equity market in the first half of May in India, after pulling out $635 million from the market in April, data from the Securities and Exchange Board of India (Sebi) shows.
Expectations are that such inflows will continue as global investors are enthusiastic that the new government in India will support businesses and increase the pace of economic growth.
The election results to elect a new parliament will be announced on 16 May.
“Money is still going to be available in debt or equity for India which means that the rupee could strengthen further. I would think that the range for the rupee has readjusted to 59-61 versus 60-62 earlier,” Krishnamoorthy said.
