Rupee rebounds 22 paise to 75.51 against dollar on stimulus hopes

The rupee on Tuesday rebounded by 22 paise to close at 75.51 against the US currency on hopes of stimulus measures by the government and a weak dollar in the global markets as countries started to open up their economies.

Foreign fund inflows and a spirited recovery in domestic stocks also supported the rupee, forex dealers said.

The rupee opened lower at 75.89 at the interbank foreign exchange market and moved between 75.49 and 75.95 in the day trade. The currency finally settled at 75.51 against the US dollar, registering a rise of 22 paise over its previous close of 75.73.

"Rupee traded strong as expectation of an announcement of stimulus package after news of Prime Minister Narendra Modi to address the nation later at 8 pm supported sentiments," Jateen Trivedi, Senior Research Analyst (Commodity & Currency) at LKP Securities commented.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.13 per cent lower at 100.11.

Spain, Italy and France -- which are among the worst-hit countries by coronavirus -- are gradually reopening their businesses encouraged by slowing COVID-19 death and infection rates.

However, the Chinese city of Wuhan reported six new infections in two days and South Korea announced its biggest spike in new cases for more than a month, raising fears of the second wave of infection.

"There was some pressure building up on the rupee in early morning trades, as concerns about the second wave of virus infections deterred risk appetite and the dollar index firmed.

"However, once the dollar index gave up gains and Asian currencies came off lows, the rupee was also off its opening lows of 75.95," said Sugandha Sachdeva, VP-Metals, Energy & Currency Research, Religare Broking.

Sachdeva further said that the rupee further stood its ground on exporters' dollar sales, as well as likely RBI intervention.

"Going forward, an effective fiscal stimulus package will help the rupee appreciate towards 74.80 levels in the near-term. Even though risks of the virus persist and losses in equities continue to weigh, the rupee looks to remain supported by the level of 76.60 mark at this stage," Sachdeva said.

In India, the death toll due to COVID-19 rose to 2,293 and the number of cases climbed to 70,756 in the country on Tuesday, according to the Health Ministry.

Meanwhile, the number of cases around the world linked to the disease has crossed over 41.94 lakh and the death toll has topped 2.86 lakh.

Traders said forex markets eye inflation, industrial production data and Prime Minister Narendra Modi's announcement about reopening of the economy.

Prime Minister Narendra Modi was scheduled to address the nation at 2000hrs on Tuesday, a day after he interacted with chief ministers on ways to deal with the spread of coronavirus and also boost economic activity.

"The tug of war between weaker economic data and foreign fund inflows continues in the market. Liquidity is winning the battle for now," said Devarsh Vakil, Head Advisory, HDFC Securities.

According to Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services weaker-than-expected IIP data could keep the rupee gains in check.

"For the next couple of sessions we expect the rupee (Spot) to quote in the range of 75.20 and 76.20," he said.

After plunging over 716 points during the day, the 30-share BSE Sensex staged a late recovery to pare losses but still settled 190.10 points or 0.60 per cent lower at 31,371.12.

Similarly, the NSE Nifty declined 42.65 points, or 0.46 per cent, to 9,196.55.

The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 75.6838 and for rupee/euro at 82.0549. The reference rate for rupee/British pound was fixed at 93.9867 and for rupee/100 Japanese yen at 70.78.