The rupee extended its gains marginally on Wednesday, closing at 94.53 per US dollar after retreating from the six-week high of 94.29 seen during the day, amid expectations of increased dollar flows into Indian banks from next week onwards.
The rupee had closed at 94.56 on Tuesday.
The Indian currency appreciated about 1.3% at the closing level after the Reserve Bank of India (RBI) took a slew of measures to boost dollar inflows. The rupee is, however, still sharply weaker compared to its 90.98 per dollar close on February 27, a day before the US-Israel war against Iran broke out.
The rupee had closed at 95.78 on June 4 ahead of the RBI’s monetary policy review.
“Inflows into foreign currency non-resident-bank (FCNR-B) deposits are expected to see traction from next week onwards. This will help the rupee to gain further from the current level,” said KN Dey, a senior foreign exchange market consultant. “Dollar outflows from local markets have also slowed.”
The rupee opened the day 10 paisa stronger at 94.46 against the previous close of 94.56 per dollar as continued fall in global crude prices boosted the sentiment. It gained further to 94.29, its highest level since May 7.
Demand from corporates and importers at 94.29/30 levels forced the currency to give up its intra-day gains.
“The Indian rupee rallied to a six-week high, marking its fourth consecutive session of gains on the back of anticipated dollar inflows following RBI measures. The local currency outperformed its Asian peers as crude oil prices continued to soften, driven by expectations of easing energy supply pressures from a potential US-Iran deal,” said Dilip Parmar, analyst with HDFC Securities.
Banks have increased interest rates on FCNR-B deposits by 200-450 basis points to woo overseas Indians. This follows the regulator’s decision to bear the hedging on foreign currency-linked deposit mobilisation and swap the dollar with it at par, allowing hefty cost savings for banks.
A basis point is a hundredth of a percentage point.
