Rupee surges by 78 paise

Tags: Economy
In sync with a surge in stocks, the rupee on Tuesday appreciated by 78 paise against the US dollar. The domestic currency closed at 16-month high of 65.81, a level last seen on November 6, 2015. The rupee had a stellar performance so far this year, as it is the third-best performing currency in Asia. Only South Korean won and Taiwanese dollar have done better than rupee. Forex dealers said there was heavy dollar unwinding from speculative traders and exporters tracking stock markets.

The scale of BJP’win in Uttar Pradesh sparked a 490-point rally in stock markets.

In cross-currency trade, the rupee jumped against the British pound to finish at 79.84 from 80.95 and hardened further against the Japanese yen to end at 57.26 per 100 yens compared to 57.73 earlier.

Divya Devesh, an Asia FX strategist at Standard Chartered Bank in Singapore, said, “We expect the Reserve Bank of India to more actively cap further rupee gains given the sharp swing higher in the real effective exchange rate in recent months. He forecasts the rupee at 69 rupees to the dollar by year-end.

The outcome of assembly polls in five states in favour of Narendra Modi-led NDA has the potential of attracting overseas inflows on anticipation of quickening pace of structural reforms, analysts said.

Prathamesh Mallya, chief analyst, non-agri commodities & currencies, Angel Broking, said, “BJP’s massive victory in the major state election has created good sentiments in the Indian market leading to appreciating rupee and higher equities. This positivity comes despite the looming threat of US rate hike, which is scheduled to be held on 14-15th March 2017. The odds of US Federal Reserve increasing interest rates have surged beyond 80 per cent. The rupee will continue to appreciate towards 65.80 in the near term.”

(With inputs from Bloomberg)

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