The rupee on Friday gained 34 paise or 0.47 per cent to close at a one-week high of 71.85 against the US dollar on hopes of government intervention to defend the volatile currency and softening in the global crude oil prices over the last two days.
Extending gains for a second session, the domestic unit hit a session high of 71.53 in early trade. Over the last two trading sessions rupee has recovered 79 paise or over 1 per cent against the dollar.
While Prime Minister Narendra Modi held a meeting with finance ministry officials on Friday and will hold another meeting on Saturday in the wake of decline in rupee and rising fuel prices, both currency and stock markets rose in expectation of some government intervention.
Meanwhile, the Sensex on Thursday jumped about 373 points to reclaim the 38,000-mark as better-than-expected macro data and further recovery in the rupee triggered widespread buying. The NSE Nifty too breached the 11,500-level with a jump of 145.30 points. The Sensex stayed in the positive terrain through the session and touched a high of 38,125.62. It finally settled 372.68 points, or 0.99 per cent higher at 38,090.64 — its highest closing since September 7 when it had finished at 38,389.82.
Also, the broader Nifty climbed 145.30 points, or 1.28 per cent to finish at 11,515.20. Intra-day, it shuttled between 11,523.25 and 11,430.55. On the other hand, while the Brent crude had hit $80 per barrel couple of days back, it softened to $77.38 per barrel (at 20:30 IST) offering some relief to rupee. On Friday, the Brent crude prices were down by over 1 per cent. Experts say that falling crude oil prices will strengthen rupee and stock markets. “The most positive development from India’s perspective is the increase in OPEC’s August production by 4,20,000 barrels a day, to average 32.63 million a day. That output more than made up for an expected decline in Iranian supply due to extant and pending US economic sanctions. Nothing can be more heartening. The falling crude will strengthen our rupee and the markets.” said V K Sharma, head private client group & capital market strategy at HDFC Securities.
Rupee also benefitted from the massive US Dollar re-pricing in the aftermath of the weak US inflation report, discounting the chances of Federal Reserve hiking rates four times this year. A combination of positive macro-related developments after the country’s industrial production grew at 6.6 per cent in July and retail inflation cooled to a 10-month low of 3.69 per cent in August, strengthened the rupee sentiment.
Earlier on Friday, official data showed WPI-based inflation eased to a four-month low of 4.53 per cent in August. India’s benchmark 10-year sovereign yield softened to 8.12 per cent. The rupee got a shot in the arm after the government said all steps will be taken to ensure the domestic currency does not depreciate to “unreasonable levels”, amid reports that Prime Minister Narendra Modi will take stock of the economic situation over the weekend.
The domestic currency has been sliding against the US dollar since August, depreciating over 6 per cent since then as oil prices rebounded and trade tensions revved up. The ‘feel good’ factor in the economy and the relative political stability alongside government’s continued commitments towards strong governance amid relatively low inflation rates largely shielded Indian currency from any big drag, a forex dealer said.