Moneycontrol
May 17, 2017 05:59 PM IST |

Indian rupee pares gains against dollar, closes lower at 64.16

After opening stronger against the dollar, the Indian rupee pared its gains on Wednesday as state-owned banks bought the dollar heavily on behalf of the Reserve Bank of India, dealers said.

Indian rupee pares gains against dollar, closes lower at 64.16

Pranay Lakshminarasimhan

Moneycontrol News

After opening stronger against the dollar, the Indian rupee pared its gains on Wednesday as state-owned banks bought the dollar heavily on behalf of the Reserve Bank of India, dealers said.

The rupee opened at 64.01, 6 paise higher than its previous close of 64.07, and strengthened briefly to touch an intraday high of 63.98.

After the brief rally, the rupee started to weaken and continued to do so for the rest of the session, touching an intraday low of 64.16, which also happened to be the closing price. This was primarily on account of dollar buying by state-owned banks, dealers said.

"The RBI may not be comfortable with the pace at which the rupee is gaining," said Anindya Banerjee of Kotak Securities. “However, I don’t think that the RBI has a problem with rupee appreciating in general."

The analyst added the rupee has been strengthening mainly on account of speculative buying and investors looking to benefit from the higher carry being offered by Indian markets. The rupee could, therefore, appreciate further to around 63.90 and sustain the level, he said.

A part of the reason for why the rupee has been gaining is weakness in the dollar. The dollar index, which measures its strength against a basket of six currencies, declined on Wednesday to 97.99, 11 points lower than its previous close.

So far this year, foreign institutional investors (FIIs) have bought equities worth USD 6.77 billion and USD 7 billion of debt securities in the Indian market. Analysts and dealers alike expect flows from foreign investors to continue remaining strong for the foreseeable future, as the real interest rate being offered here is more than most other countries at the moment.
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