Modi fever takes rupee to 10-month closing high of 59.29 vs dollar
The rupee on Thursday gained 39 paise to close at a nearly 10-month high of 59.29 against the US dollar following sustained selling of the American currency by exporters and continued capital inflows, ahead of keenly-waited Lok Sabha poll results to be unveiled on Friday.business Updated: May 16, 2014 00:19 IST
Optimism over an anticipated pro-business Modi government a day ahead the release of election results pushed the rupee to 59.10 against the US dollar during intra-day trade on Thursday but suspected forex-buying by the Reserve Bank of India (RBI) capped gains and the Indian currency ended at a 10-month closing high of 59.29 compared to Tuesday’s close of 59.66, a gain of 37 paise.
Foreign exchange markets were closed on Wednesday on account of a local holiday.
Broader gains in the rupee have been capped in recent sessions with the RBI actively buying dollars and the central bank is likely to continue the trend to prevent further appreciation of the currency from current levels, traders said.
Experts said the rupee is unlikely to move in a broad range irrespective of the election results as the dollar has depreciated internationally and the rupee was also reflecting a worldwide adjustment.
"Appreciation of the rupee is part of a global trend, said Kishore Narne, commodities head at brokerage firm Motilal Oswal.
"There have been very good (dollar) inflows, if the election outcome is in line with expectations, we could see rupee in the 58 territory," said Uday Bhatt, a foreign exchange dealer with UCO Bank. "A negative shock can take it past 60 to a dollar."
"The trading range for the rupee is expected to be 58.80 to 59.80," said Pramit Brahmbhatt, CEO, Veracity Group.
RBI governor Raghuram Rajan said in Shimla, where the central bank’s board was meeting, that regulators have put in place contingency plans to infuse liquidity into markets to prevent volatility in view of the election results.
While a strong rupee makes oil and gold imports cheaper, thereby reducing the current account deficit, a weak rupee can hurt exports and fuel interest rate hikes.
Analysts said economic fundamentals and global issues including US Fed’s tapering of its monetary stimulus programme will determine the rupee’s movement.