The rupee sustained its rally against the dollar for the fourth consecutive session on Tuesday, clocking an overall 6% gain since last Tuesday. The 6% rise in four straight sessions is the highest since 1973, according to data compiled by Bloomberg.
On Tuesday, the rupee gained 2%, or 140 paise, to close at 63.84 per dollar, the highest closing level since August 23, making it the best performing emerging market currency of the day.
Indian markets were shut on Monday due to a public holiday. On Friday, the rupee had closed at 65.25 per dollar, posting a weekly rise of 0.7%.
Narrower trade deficit data and easing political tensions in Syria lifted sentiments in Indian financial markets. Backed by foreign fund inflows, both BSE and NSE were up 3.8% and closed a whisker away from their respective next psychological levels on Tuesday.
Analysts sing new tune
Within a week, the market outlook on the rupee has turned bullish, a neat reversal of the sense of depreciation anticipated earlier. “Easing Syria concerns, stellar gains in domestic equity markets and weakness in the dollar index helped the rupee to post strong gains,” said Jayant Manglik, president-retail distribution at Religare Securities.
The rupee may strengthen further up to 63.50 per dollar in coming days, Manglik said on Tuesday as against his outlook of 70/$ on September 3 when the rupee had lost 172 paise in a single session to close below 67/$.
Anindya Banerjee, currency analyst at Kotak Securities, expects the rupee to trade around 63.70/$. She said that a breach of that level could take the rupee into the 63-62/$ zone as well. A week ago, she anticipated the rupee to fall to 69/$.
The change in rupee outlook is due to a slew of measures announced by the Reserve Bank of India (RBI) in the past week to attract foreign exchange. “Forex inflow due to recent policy decision is yet to hit the markets. The rupee may hold around 62.00 per dollar,” said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai.
So far, the RBI measures have been successful in bringing back $673 million of foreign money back into Indian debt and equity markets in just three trading sessions.
Following the relaxation of rules on deposits for non-resident Indians, or NRIs, most Indian banks have jacked up interest rates. On Tuesday, Federal Bank announced interest rate of 10% on non-resident – external, or NRE, deposits maturing in 1,111 days. Such special offers are expected to lure more foreign funds.
At July-end, NRI deposits stood at $73 billion, as per RBI data.