Mumbai: The rupee strengthened by 28 paise to close at 70 against the US dollar on Thursday as a weak dollar prompted exporters and banks to sell the greenback, supporting the demand for the rupee. Strong overseas inflows for subscription to dollar notes of Export-Import Bank of India (EXIM) further supported the rupee.
At the Interbank Foreign Exchange market, the rupee opened stronger at 70.08 a dollar. The local unit moved in a range of 70.15 to 69.94 before finally ending at 70, showing a gain of 28 paise over its last close. The rupee on Wednesday had strengthened by 21 paise to close at 70.28 against the US dollar. This was its highest closing level since January 8, when the rupee had finished at 70.21.
The dollar index, which gauges the greenback's strength against a basket of six currencies, slipped 0.02 per cent to 96.85.
Foreign banks, including HSBC, Citi Bank, and BNP, were on the sell side. The Exim Bank on Wednesday had said that it raised $500 million by issuing a Reg-S 5-year bond issue and the proceeds will be used to fund projects.
Currency analysts said that optimism regarding a trade deal between the US and China and weakening of the greenback versus other currencies overseas also supported the rupee but are mindful of rising crude prices and the general elections.
Anindya Banerjee, currency analyst at Kotak Securities, said, “After the Indo-Pak tensions defused on 28 February, the rupee started outperforming its peers. The growing feeling in the market is that the risk of a hung Parliament has reduced significantly and because of which the rupee is strongest globally.”
Banerjee added: “But a factor to be watched is oil which has now risen to $66 per barrel. We expect the rupee to head to 69.70 against the dollar in the next few days and where RBI intervention can be expected.”
Rushabh Maru, Research Analyst at Anand Rathi Shares and Stock Brokers, said, “Volatility is expected to rise in coming sessions for the rupee as the country is heading towards the general elections. Still there is lot of uncertainty regarding the trade deal between the US and China. Hence importers are advised to hedge their exposure given the uncertainty and volatility due to domestic and global factors”
According to IFA Global, “At spot, exporters are advised to honor the stoploss of 70.80 for covering near-term exposures. Importers are advised to add to cover on dips to 69.80-90. The three-month range for dollar-rupee is 69 to 72.50 whereas the six-month range is 68.50-74.50.”
Last year, the rupee had tumbled about 10 per cent and hit a record low of 74.485 to the dollar in October.
