The rupee surged 53 paise to hit a 10-week high against the US dollar on Friday, August 27, settling at 73.69 (provisional), tracking a firm trend in domestic equities ahead of the key speech from US Federal Reserve Chair Jerome Powell. At the interbank foreign exchange market, the domestic unit opened at 74.17 against the dollar and swung between 73.69 to 74.20 during the trading session. In an early trade session, the local unit rose five paise to 74.17 against the greenback.
The domestic currency gained strength in the afternoon trade and settled for the day at 73.69, higher by 53 paise, against its previous close of 74.22. On a weekly basis, the local unit has appreciated 70 paise against the American currency. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, slipped 0.04 per cent to 93.02.
Rupee Registers Its Biggest Weekly Gain In Four Months
During the trading session today, the domestic currency witnessed its biggest weekly gain in four months as investors unwound long dollar positions ahead of U.S. Federal Reserve Chairman Jerome Powell's Jackson Hole speech to be held later in the day. The local unit rose one per cent on the week - its best level registered since the last week of April 2021.
Investors trimmed bearish bets on most of the Asian currencies as the dollar softened on the hopes of a temporary pushback in the Federal Reserve's tapering timeline, while the sentiment on the rupee turned marginally bullish, according to a poll conducted by news agency Reuters on Thursday, August 26.
What analysts say:
Mr Amit Pabari, MD, CR Forex:
''Globally, three members of the FOMC urged the Fed to start tapering its asset purchases program despite the risk from the spreading delta variant. Now, investors await the highly-anticipated Powell speech today for more details on the Fed's tapering plans.
If Powell remains dovish in his speech delivering that the economy shall still need support on account of rising covid cases and could wait a few more weeks before signalling taper, DXY should retrace back to consolidate between 92.50-92.80 levels.
And if Powell suggests some hawkish comments pointing towards tapering in the upcoming time to subdue the rising inflationary pressures, the dollar shall extend its upward rally towards 93.50 in the near term and 95.50 in the medium term.''
Mr. Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors:
''Dollar rupee broke the 74.10 mark and fell below 74.00 level to the near term support of 73.80 as Nat Banks purportedly acting on behalf of RBI left the 74.10 level which they had protected three times in the last few days.
The flows in the system were sufficient to take the rupee upto 73.80. If 73.80 is broken then we can see 73.50 and even lower levels which of course could be slowed down by RBI accumulating the inflows. With IPOs of LIC, Asset Monetization and BPCL divestment we could see more inflows coming. The Jackson Holes Meeting today is crucial to determine Fed's view on tapering.''
Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities:
''After over a month of being caught in a narrow range between 74.10 and 74.60, USDINR broke down. Lumpy corporate $ flows, rising FPI inflows, and strong sentiments in the equity market caused the sharp slide.
The central bank was less aggressive in defending the 74.00 level and that caused stop-loss related selling from option writers. Tonight Jackson Hole symposium will be an event to watch but it may be not enough to turn the tide for the US Dollar. Over the next week, USDINR can trade between a range of 73.50-74.10 on spot.''
Mr. Nish Bhatt, Founder & CEO, Millwood Kane International:
“The rupee gained in trade today, it gained past the 74/$ mark to touch a 2-month high level. At the highest point, it was trading at 73.64/$. The gains were on back on fund flows that helps the equity market scale fresh highs, outperforming its global peers.
The USD has been trading weak on concerns of the Fed's move on tapering, uncertainty surrounding the spread of the Delta variant.
The crackdown by the Chinese government on the tech and real estate companies will lead to higher fund flows to India helping the INR further. US Fed chair's comments from the Jackson Hole Symposium on the likely tapering by Fed will guide global currencies next week.”
Domestic Equity Markets Today:
On the domestic equity market front, the BSE Sensex ended 175.62 points or 0.31 percent higher at 56,124.72, while the broader NSE Nifty climbed 68.30 points or 0.41 percent to 16,705.20. The equity benchmarks closed at record highs today led by gains in Tata Consultancy Services, Larsen & Toubro, HDFC, Kotak Mahindra Bank, UltraTech Cement, and Bharti Airtel. The Nifty ended above the 16,700-mark for the first time ever.
Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities:
''Both BSE Sensex and Nifty gained around 1.5 per cent each during the week but saw sharp divergences among constituents. High-frequency sectoral indicators, released last week, kept investor confidence steady, while their positioning veered away from high-beta stocks ahead of the Jackson Hole Economic Symposium tonight.
The Nifty 50 was at 16,692 on 27th August, gaining 1.5 per cent during the week, while the Sensex was at 56,100 gaining 1.4 per cent during the week.
FPI inflows have not been very exciting despite the general market bullishness and a spate of IPOs. We expect FPI flows to be volatile in the near terms, given the indication of the likelihood of tapering of assets, which could have a major impact on global equity markets.''
According to exchange data, the foreign institutional investors were net sellers in the capital market on August 26 as they offloaded shares worth Rs 1,974.48 crore. Brent crude futures, the global oil benchmark, increased 1.32 per cent to $ 72.01 per barrel.