The Indian rupee made a significant gain of 56 paise against the US dollar on Monday, as it wiped off all its losses since July last year, in the day’s trade to close at 68.53, a seven-month high.
With its sixth consecutive gain, the domestic currency has gained 162 paise against the US dollar. On March 8, the rupee had closed at 70.15 against the dollar and has been consistently appreciating since then.
On Monday, the rupee opened higher at 68.92 at the interbank forex market and gained further ground to touch 68.87. During the day’s trade, the rupee traded between 68.51 and 68.93 before closing at 68.53. The last time that the rupee closed at such level was on July 13, 2018, when it had gained 4 paise to close at 68.53.
The rupee has made strides, despite crude oil prices being on surge in the global markets, after the US put sanctions over strife-hit Venezuela — one of the major producers of crude oil globally.
As the rupee gained 2.3% in the past six trading days, the prices of the benchmark Brent crude surged by 2.6% and were trading at $67.48 a barrel at the time of filing this copy.
“Crude oil prices have been on the upward path with an increase of a little less than $ 2/bbl in this period. Therefore, it is unlikely that the trade balance would have shifted favourably for the rupee,” said Care Ratings in its research report, adding that it’s likely to go up in the foreseen future.
However, the country’s narrowing trade deficit and selling of the American currency by exporters supported the domestic currency led to this surge in the rupee value.
Economists believe that the surge of the rupee will hover around 68-70 in the near term.
The major reason, according to economists and traders across the spectrum, is that the rupee has been surging on the back of increased flow of foreign institutional investors (FIIs) into the markets, as macros improve for the economy. The FIIs, in the last six trading sessions, have parked in a net of Rs 16,640 crore into the Indian markets.
“Basically, the FIIs have changed the outlook on the Indian markets. They are seeing improving macros in the economy. There is also a hope of stable government in the near future. Also, the NBFC crisis didn’t take the toll on any other company other than IL&FS — like the markets expected. All these are the contributing factors,” said Rahul Shah, vice-president -Equity Advisory Group, Motilal Oswal, adding that they are likely to continue parking in the money in near future.
Also, the exporters, who close their books of accounts before the closing of the financial year, have been selling their stock of dollar in the process, putting pressure on the greenback.