Rupee strengthened for a second straight session on Friday, rising 63 paise to close at 95.73 on the back of easing crude prices, positive equity markets, and softer US yields coupled with the intervention from central bank.
Rupee opened at 96.30 in the interbank foreign exchange market on Friday and continued to remain in the green territory and touched an intra-day high of 95.30 and a low of 96.68 before settling at 95.73. The latest rise comes after the currency had rebounded 50 paise on Thursday from its record closing low to end at 96.86 against the greenback on Wednesday after falling to 96.96 intraday.
Forex traders said the Reserve Bank was active in the market throughout the day. The $5 billion swap announced for May 26 also kept the punters at bay. Another enabler is the falling bond yields and easing geopolitical tension that have softened crude prices. Benchmark stock indices ended the session in positive territory, with the Sensex rising 231.99 points and the Nifty advancing 64.60 points.
Radhika Rao, senior economist at DBS Bank, said the rally in rupee is due to the Reserve Bank reviving monetary operations to slow rupee’s fall, after the currency came within touching distance of a record low of 97 earlier this week. She said a closer scrutiny of outbound FDI and encouraging exporters to channel proceeds to the onshore markets might be pursued.
In the run-up to the monetary policy review in early June, markets are likely to increasingly price in the likelihood of a hike, especially if the rupee remains under pressure and a resolution on the Iran war proves to be elusive, she added.
The rupee maintained its upward momentum for the second straight day, effectively reversing the losses sustained at the start of the week, Dilip Parmar senior analyst at HDFC securities said and attributed the rally largely to the Reserve Bank’s active market intervention post the announcement of its dollar swap, alongside a reprieve in crude prices as geopolitical risks eases.
Parmar sees the spot rupee facing resistance at 96.20 and support at 95.40.