Rupee extended its gaining streak for the fifth straight session on Thursday, adding 14 paise to close at 94.59, its largest single-day gain since July 27, buoyed by the improved balance of payment condition following higher-than-expected foreign currency deposits which raked in a whopping $127.23 billion in NRI deposits alone.
Banks mobilised a record $127.23 billion through FCNR-B deposits under a special central bank programme aimed at bolstering the country’s foreign-exchange liquidity. Including overseas foreign-currency borrowings and external commercial borrowings, the total inflows under the forex swap windows reached $136.34 billion as of August 31, according to the RBI data.
The measures improved the currency outlook at a time when renewed US-Iran conflict has pushed crude prices higher and contributed to a global bond selloff.
Rupee opened trade at a 10-week high earlier in the day at 94.26, its highest level since late June, after settling at 94.97 on Wednesday. The unit has risen more than 1% this week, making it among the best-performing currencies in Asia.
The massive fundraising, however, further swelled the Reserve Bank’s already-record future dollar liabilities, potentially putting a ceiling on rupee's appreciation, traders and analysts said.
Dilip Parmar, senior research analyst at HDFC Securities, said rupee registered its largest single-day gain since July 27, driven by massive capital inflows from the concessional swap schemes that reeled in a dollar haul, far exceeding market expectations. Also, weakness in the greenback and steady oil prices provided secondary support.
Technical setup has turned weak for the spot rupee-dollar pair, weighed down by a bearish chart pattern of lower highs and lower lows on the daily timeframe. The pair finds immediate support at 94.10 and resistance at 94.95, he told TNIE.
The inflows will further boost foreign-exchange reserves, which jumped to an all-time high of $729.3 billion last month, providing the central bank more dry powder to defend the local currency and absorb oil and other external shocks. And Singapore brokerage DBS expects the reserves to cross the $750-billion in the coming week.