Rupee Gains To 78.10 Per Dollar; Off Life Low For Now But Risks Remain

The rupee surged sharply on Thursday to reverse from its new all-time low close in the previous session as the dollar was off its two-decade highs even as the US Federal Reserve delivered its biggest rate hike since 1994.

Provisionally, the rupee gained 12 paise to close at 78.10 against the US dollar, a day after weakening to a new all-time low close of 78.22 per dollar in the previous session.

The dollar had retreated from a 20-year high after the Fed delivered its biggest rate hike in decades, but then tempered its outlook by telling investors that such sharp moves higher were unlikely to become a habit.

Markets had expected the 75 basis point (bp) hike and priced in several more after a surprisingly hot inflation reading last week.

The dollar had scaled new heights as US yields rose, but it lurched lower after Fed Chair Jerome Powell’s press conference. During Thursday, the dollar recovered slightly in a volatile session.

At the interbank forex market, the rupee opened at 78.06 against the greenback and moved in a narrow range. It finally ended at 78.10, a gain of 12 paise over its previous close.

On Wednesday, the rupee had plunged 18 paise to close at a new all-time low of 78.22.

The dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.13 per cent to 105.02.

Brent crude futures, the global oil benchmark, fell 0.25 per cent to $118.21 per barrel as demand concerns offset tight supply worries.

“Even after higher trade deficit numbers, weaker regional currencies and risk-averse sentiments, the rupee got support from the fall in crude oil prices,” Dilip Parmar, Research Analyst at HDFC Securities, told PTI.

He further noted that some relief rally in the rupee in the near-term is likely but odds of 78.50 are very much alive.

“As the FOMC event is over, the focus will shift back to fund flows and risk moods for rupee movements,” Mr Parmar said, adding that spot USD-INR is expected to consolidate in the range of 77.70 to 78.30 before heading north.