Rupee jumps 53 paise to breach 78 level, closes at 1-month high on FII inflows

Increased risk appetite on hopes of a slow pace of tightening by the US Federal Reserve has also strengthened the rupee sentiment.

The rupee has gained 138 paise or 1.73 per cent against the US dollar in the four days to Tuesday to regain the 78 level. At the interbank forex market, the local unit opened strong at 78.96 against the greenback and witnessed an intra-day high of 78.49 and a low of 78.96 on Tuesday.

It finally ended at 78.53 against the American currency, a rise of 53 paise over its previous close.

The rupee had closed near this level on June 27. In the previous session, the rupee had closed at 79.06 against the US dollar.

"Rupee gained strongly crossing above 78.50 on the back of dollar index weakness and crude prices falling below USD 95 in WTI. The range for rupee can be seen between 78.45 to 78.85,” Jateen Trivedi, VP Research Analyst at LKP Securities.

The Indian rupee has perked up to four-week highs, after seven months of successive decline as there has been a clear shift in sentiments, and investors are no longer seeking safety in the US dollar, which has led to renewed inflows in the domestic markets, Sugandha Sachdeva, Vice President – Commodity and Currency Research, Religare Broking Ltd, said.

"Largely it was the tone of the Fed Chair, where he sounded less hawkish and indicated a slow pace of tightening which has improved risk appetite in the markets. Besides, there were visible signs of exhaustion in the dollar index around the 109 mark which prompted a sell-off in the greenback, while aiding the recovery rally in the Indian rupee,” Sachdeva added.

A decline in crude prices below USD 100 a barrel, amid weakening demand as well as a ramp-up in output from Libya, has further eased concerns about the widening current account deficit.

"The focus is now on three key events scheduled for the week -the OPEC+ meeting, RBI monetary policy outcome, and the US jobs report that will provide further cues and dictate the trend for the domestic currency,” Sachdeva noted.

"Against the odds, the Indian rupee and equities outperformed in the region as foreign institutions turned into net buyers of equities and debt. The dollar-long liquidation, FPI inflows, lower crude oil prices and improvement in high-frequency data very well supported the rupee gains,” Dilip Parmar, Research Analyst, HDFC Securities, said. Going ahead, the bias remains downward as the pair is closing below 50 days’ simple moving average and a level below 78.50 will give way for 77.60.

"However, one should adjust their position as per the geopolitical updates from US-China”, he added. Going ahead, the bias remains downward as the pair is closing below 50 days’ simple moving average and a level below 78.50 will give way for 77.60.

Brent crude futures, the global oil benchmark, fell 0.38 per cent to USD 99.65 per barrel. Brent crude futures, the global oil benchmark, fell 0.38 per cent to USD 99.65 per barrel.

The dollar index, which measures the greenback’s strength against a basket of six currencies, strengthened by 0.10 per cent at 105.55.

Foreign institutional investors were net buyers in the capital market on Tuesday, purchasing shares worth Rs 825 crore, as per exchange data.