Rupee strengthened sharply on Thursday, breaking above the psychological level of 70 per dollar after a comment by US Federal Reserve chairman indicated a pause on the rate hike cycle, weakening the dollar against all major currencies of the world.
The Indian currency ended 68.84 against the greenback, gaining 77 paise or 1.1% in a single day.
US Federal Reserve Chair Jerome Powell’s remark indicated a likelihood of foreign funds flowing back to emerging markets, including India, whose currency has rebounded from a record low in October due to an unprecedented fall in crude prices and return of FIIs. On Thursday, the Indian currency became Asia’s best performing one.
A fall of nearly 22% in Brent crude in the past one month has helped the rupee gain over 5%.
Analysts believe the relief rally in the Indian currency will continue in the immediate future as crude oil supply has been overshooting its demand.
All eyes are now on the December 6 meeting of OPEC members in Vienna where a discussion on production cut is expected to be held, but analysts are optimistic that the move will be opposed by Russia and help crude prices cool further.
“The rupee remains firm on account of sharp decline in crude oil prices in the international market. This is positive for India as the decline in crude prices may push inflation and current account deficit lower,” said Rushabh Maru, research analyst, Anand Rathi Shares and Stock Brokers.
Foreign funds, too, turned bullish on India and bought shares worth Rs 823.47 crore on Thursday.
