Rupee snaps four-day fall, hits 5-week high at 60.4

Tags: News
The rupee snapped a four-day losing streak and hit a five-week high on Wednesday as risk was back in favour after Ukraine and Russia agreed on a ‘permanent ceasefire’ helping local shares hit record highs yet again.

Dollar sales by Japanese banks came on the back of the prime minister Narendra Modi’s first major foreign trip to Japan, from where he returned earlier in on Wednesday. The euro climbed against almost every other major currency after the ceasefire news, which offers some comfort to the euro zone economy that has borne the brunt of the impact of the conflict.

However, traders said there was good resistance for the rupee at 60.35-40 levels with public sector banks jumping in to buy the US greenback. “Today was a day of long liquidation. The 60.40 level is crucial now, a break of which opens the gate for sub-60 levels. Broadly the 60-61 range should continue to hold,” said Ashutosh Raina, head of foreign exchange trading at HDFC Bank.

“The outcome of the European Central Bank’s meeting on Thursday and the US jobs report on Friday are the next key triggers to watch out for,” he added.

The partially convertible rupee closed stronger at 60.4850/4950 versus Tuesday’s close of 60.68/69.

The rupee gained to 60.33 during the session, its highest since July 31.

Broad losses in the dollar also helped the rupee. The index of the dollar against six major currencies fell 0.12 per cent. Caution prevailed ahead of the ECB policy meeting on Thursday, which could result in additional monetary stimulus. Such an outcome could benefit the rupee by raising expectations for additional foreign flows into the country.

Indian shares extended a record-setting winning streak as software exporters such as Infosys rallied on strong US economic data, while continued foreign buying and falling oil prices also helped.

Sensex touched its fourth consecutive record high of 27,225.85, before ending at 27,139.94, up 0.45 per cent from Tuesday’s close. Nifty rose as much as 0.73 percent to mark its third straight record high at 8,141.90. It closed up 0.39 per cent at 8114.60.

A fall in Brent crude prices to 16-month low and recent supportive economic data at home such as better-than-expected 5.7 per cent GDP growth in April-June are also reinforcing investor optimism.

Foreign portfolio investors bought shares worth Rs 673 crore ($111 million) on Tuesday, taking their total purchase to over $13 billion so far this year.

The US employment data on Friday could also help adjust expectations about when the US Federal Reserve will remove its monetary stimulus.

In the offshore non-deliverable forwards, the one-month contract was at 61.83 while the three-month was at 61.42.

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