Rupee gains for 3rd straight day, rises 5 paise vs US dollar

The partially convertible rupee settled at 75.5500/$1 on Wednesday as against 75.60/$1 at the previous close. The Indian currency, which had opened at 75.5400/$1, moved in a band of 75.4675-75.6525/$1 in the course of the day.

The dollar index, which measures the US currency against a basket of six major rival currencies, was last at 96.47. Last week it had risen near to 97-mark, touching a high of 96.99.

The dollar had firmed up earlier in the month as the US Federal Reserve announced an end to pandemic-era asset purchases and signalled tighter monetary policy in the world’s largest economy.

The prospect of higher interest rates in the US has sent foreign investors rushing to exit riskier emerging markets such as India of late. Data showed FPIs have dumped equities worth Rs 37,000 crore since October 1. This month alone, FPIs sold Indian stocks worth Rs 17,374 crore, NSDL data suggests.

However, with the rupee now stabilising and showing resilience against the US dollar, some traders felt that the ferocity of FPIs’ selling pressure could abate; especially as the Reserve Bank of India has also recently stepped up its interventions in the currency market to curb volatility in the exchange rate, dealers said.

The latest data showed that the RBI’s total foreign exchange reserves were at $635.83 billion as of December 10; among the largest held by any central bank around the globe.

“We have seen a consistent pattern of US dollar sales for both corporate flows as well as investment in Indian IPOs,” a dealer with a foreign bank said on condition of anonymity.

“Equities have started to show some strength after the recent bout of selling pressure. After the RBI announced its presence through interventions we also saw a clear trend of exporter selling (of dollars). We should stabilise around 75.50/$1 by the end of the month and the calendar year,” he said.

Government bonds were largely steady, with the yield on the 10-year benchmark 6.10 per cent 2031 paper setting one basis point lower at 6.46 per cent.

Sovereign bonds had sold off heavily earlier in the week as the RBI’s unexpected decision to announce a 3-day variable rate reverse repo auction was perceived as a sign of the central bank’s desire to nudge short-term money market rates close to the repo rate of 4.00 per cent.

The yield on the 10-year bond has hardened as much as 6 basis points so far this week. Bond prices fall when yields rise and vice-versa.