Rupee hits 10-week closing high of 94.48 per US dollar
The currency posted its biggest daily gain since July 27, after the RBI’s FCNR(B) scheme attracted hefty dollar inflows even as importer demand pared some of its earlier gains.
The Indian rupee achieved a 10-week closing high of 94.48 per US dollar on Thursday, driven by stronger-than-anticipated dollar inflows under the Reserve Bank of India's special scheme. Despite this, importer demand helped to moderate some of the currency's gains. The rupee closed 0.5% higher at 94.4850 per US dollar, marking its highest level since June 25 and the biggest daily increase since July 27.
The opening price was 94.30 per dollar, but gains were curtailed to 94.49 during the session as importers became more active. Positive sentiment was spurred by the Reserve Bank's special measures, which attracted far more inflows than economists anticipated, suggesting the central bank may use its new tools aggressively to manage the rupee's value.
Kunal Sodhani, head of treasury at Shinhan Bank, noted that the RBI's existing forward short position of $137 billion could enable the bank to actively manage the currency, shifting from mere defense against depreciation to two-way management. However, importer demand emerged after the currency's opening dip, limiting further gains.
In the medium term, high oil prices due to renewed tensions between the U.S. and Iran pose a significant challenge for importers. A sustained rise in oil prices could increase India's import bill and trade deficit, making importers more inclined to lock in their dollar requirements. This, in turn, could strengthen the rupee and potentially lead to a higher Federal Reserve interest rate hike this month.
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
