The rupee has extended its rally for the third straight session on Friday, wiping out all losses since Donald Trump’s win as the president of the US last November.
Analysts see the currency will see significant gain against the greenback, going forward. The rupee rallied nearly 1% intra-day and breached the psychologically 84 level and it settled at 83.5568 against the dollar. Such strength was last seen in June 2024. This comes within two months after the rupee had plunged to a historic low of 87.95 on February 10.
Currency traders cited strong dollar inflows into the equities and also into debt coupled with short-covering amid rising hopes of a US-India trade deal as the main driver of the rupee gains. The rupee has risen nearly 2% this week on the back of a 2.3% rally in March.
There was large short covering after reports trickled in a trade deal with the US, a trader told the TNIE. Exporters’ dollar sales and a scaling back of bearish wagers on the rupee have also helped, he said, adding that investors have ramped up bullish wagers on the
rupee, alongside most of its regional peers.
One of the key reasons for the currency gaining strength is the continuous inflows by the foreign investors who have been net buyers for the 11th straight session in equities. This is the longest run of inflows in two years. The lack of aggressive dollar buying by the central bank has also aided, traders said.
Another aiding factor is the continuing weakness of the dollar as a result of which the dollar index has come off significantly from its January highs of 110 and is hovering around the 100 mark now. Meanwhile, the forex reserves continued the gaining streak for the eighth consecutive week for the period, adding $1.983 billion to $688.129 billion during the week to g April 25. In the previous week the kitty had jumped by $8.31 billion. The reserves had peaked at $704.885 billion in the week to September 27, 2024.
For the reporting week, foreign currency assets, a major component of the reserves, rose $2.168 billion to $580.663 billion, the RBI data showed Friday. Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the
foreign exchange reserves.
Following the massive drop in gold prices, the gold reserves fell $207 million to $84.365 billion during the week while the special drawing rights rose $21 million to $18.589 billion and the reserve position with the IMF also rose $2 million to $4.512 billion.