Mumbai: The rupee strengthened by 17 paise against the dollar to close at 70.97 tracking gains in the Chinese yuan, as the US President Donald Trump went easy on the threat to raise tariffs on $200 billion of Chinese imports from 10 per cent to 25 per cent on March 1.
The equity markets too got a boost from bilateral deal making activities. The rupee appreciated ignoring the rise in Brent crude prices. Currency experts have a bullish outlook for the rupee this week.
The US President said he would extend a deadline to raise tariffs on Chinese goods beyond this week, citing “substantial progress" in the latest round of trade talks that ended on Sunday in Washington.
At the interbank foreign exchange market, the rupee opened on a positive note at 71.03 against the US dollar. The domestic unit swung intra-day between a high of 70.96 and a low of 71.09, before settling at 70.97, gaining 17 paise over its previous close.
With the dollar weakening and optimism improving, emerging market currencies also rose against the dollar, with the South African rand strengthening more than one per cent and the Mexican peso and Russian rouble following closely behind. The Japanese yen rose 0.06 per cent against the dollar at 110.75 yen per dollar.
Anindya Banerjee, Currency Analyst at Kotak Securities, said, “The rupee is moving in line with what’s happening to the Chinese yuan. The rupee is appreciating even though the negative correlation between the rupee and the oil has widened. Brent crude is now at $67.5 per barrel. However, bond yields have been reacting to higher oil prices.”
Banerjee added: “The outlook for the rupee is bullish. We expect rupee to touch 70.5 this week while the bond yields would trade between 7.36 and 7.42 per cent for the next two weeks.”
Umesh Mehta, Head of Research, Samco Securities Ltd., said, “Donald Trump postponed the sanction on $200 billion worth of goods from China, which caused weakening in the dollar, in turn, a positive for INR. Just as Asian markets, Indian indices also opened in the green on Monday and it is expected that the Nifty will continue rising at least till levels of 10988.”
On Friday, the rupee had gained 10 paise to end at 71.14 against the dollar. The dollar index, which tracks the American unit against a basket of six major currencies, was down 0.18 per cent at 96.33.
So far this year, the rupee has declined 1.85 per cent. On Monday, foreign institutional investors (FIIs) bought equities worth Rs 2,134.35 crore while domestic institutional investors sold shares to the tune of Rs 1,746.40 crore, provisional data showed.
The 10-year bond yield closed at 7.41 per cent against Friday's close of 7.42. Bond yields and prices move in opposite directions.
