Reversing yesterday’s plunge, the rupee today staged a smart comeback to end at a nearly 3-month high of 67.19 against the US currency, surging by a solid 22 paise on fresh bouts of dollar selling by banks and exporters.
Notwithstanding a strong dollar overseas activity, the home currency managed to sidestep the early volatility after RBI’s monetary policy committee maintained a status quo on repo rate amid widespread expectations.
For the second time in a row, the Reserve bank today opted for a status quo in its key rates but shifted the stance of the monetary policy from ‘accommodative’ to ‘neutral’.
The apex banks also slashed the economic growth forecast to 6.9 per cent for the current fiscal from 7.1 per cent estimated earlier.
Though, India remains a bright spot in the global economy and the best emerging market growth stories.
Expectations of robust capital inflows against the backdrop of improving macro-economic environment and also aggressive policy reforms in the Union Budget predominantly kept the domestic unit in good spirits, forex dealers said.
The local unit resumed marginally up at 67.38 from Tuesday’s close of 67.41 at the Interbank Foreign Exchange (forex) market and oscillated in a narrow trading band in early part of the trade.
It witnessed some volatility after the monetary policy committee meet outcome.
Garnering strong momentum in late afternoon deal, the home currency hit an intra-day high of 67.18 before ending at 67.19, showing a smart gain of 22 paise, or 0.33 per cent – the level not seen since November 11, last year.
Yesterday, the rupee had lost 19 paise.
In worldwide trade, the greenback consolidated its overnight gains following better-than-expected December trade balance which showed the deficit falling slightly in December.
The US dollar index was trading higher at 100.50 in late afternoon session.
The RBI fixed the reference rate for the dollar at 67.3058 and for the euro at 71.8759.
In cross-currency trade, the rupee retreated sharply against the British pound to end lower at 83.87 from 83.33, but remained firm against the euro to close at 71.52 from 71.93 yesterday.
It also recouped against the Japanese Yen to conclude at 59.86 per 100 yens from 59.93 earlier.
Meanwhile, domestic bourses ended modestly lower after witnessing extreme volatile movements in late afternoon trade as RBI decided to hold the policy rates unchanged despite expectations of a 25 basis points rate cut on the back of falling inflation and the government’s fiscal prudence in Budget.
The benchmark Sensex declined over 45 points to end at 28,289.92, while broader Nifty ended flat at 8,769.05.
Foreign portfolio investors turned net buyers after a brief selling and bought shares worth a net Rs 201.13 crore yesterday.
In the forward market, premium for dollar rebounded owing to fresh paying pressure from corporates.
The benchmark six-month premium for July rose to 154-156 paise from 147-149 paise and the far-forward January 2018 contract also surged to 301-303 paise from 290-292 paise on Tuesday.
Crude prices dropped further following a steep rise in US fuel inventories and concerns over slowing demand from Chinese despite OPEC-led efforts to cut output.