Mumbai, Jan. 17 (PTI): Showing an impressive resilience, the rupee bounced back in style after a brief overnight crash and ended higher by 16 paise at 63.88 against the US currency on bouts of dollar selling by exporters and banks.
The government’s decision to slash its additional borrowing requirement for the current fiscal to Rs 20,000 crore from Rs 50,000 crore, estimated earlier, literally brought some much-needed relief for the battered forex market.
Moreover, a sharp pull back in crude prices — below the psychological USD 70-mark a barrel — too supported the rupee recovery momentum amid fresh capital inflows.
The Indian rupee suffered its biggest single-day fall in eight months on Tuesday and endured some turbulent trading across Asian forex region, hit hard by trade deficit worries which widened to a three-year high on higher oil and gold imports.
The domestic currency had lost 55 paise, or nearly 1 per cent, to end at a fresh two-week low of 64.04 against the US dollar.
The government had announced recently that it would go in for an additional borrowing of Rs 50,000 crore during the current financial year, raising concerns that the country may miss the fiscal deficit target fixed at 3.2 per cent of GDP.
A breathtaking rally in domestic equities too weighed on the forex trading front. On the international commodity front, global crude oil prices gave away earlier gains after analysts warned of a downward correction after prices have gained more than 13 per cent over the past month.
Brent crude futures were trading lower at USD 68.65 a barrel in early Asian trading — below a three-year high of USD 70.37 set earlier in the week. Meanwhile, foreign portfolio investors (FPIs) bought shares worth a net Rs 693.17 crore.
The domestic equities staged a spirited comeback after a brief lacklustre session as investors went on a buying spree on anticipation of recovery in corporate earnings and expectations of both fiscal discipline and a market-friendly Budget 2018.
The flagship BSE-Sensex overpowered another milestone of 35,000 to end at a new peak with a healthy 310 points, while Nifty surged over 88 points at 10,788.55.
The local currency opened lower at 64.08 compared to overnight close of 64.04 at the Interbank Foreign Exchange (forex) market on stray dollar buying.
But, soon it regained strength to trade in positive terrain tracking bullish domestic stocks and adequate dollar supplies.
It touched a high of 63.76 in intra-day trade during the late afternoon deals before ending at 63.88, showing a smart rise of 16 paise, or 0.25 per cent. On the global front, the dollar held onto modest gains against other major currencies.
The dollar index, which measures the greenback’s value against a basket of six major currencies, was up at 90.50 in early trade.
In cross-currency trades, the rupee recovered against the euro to settled at 78.02 compared to 78.22 and also recouped against the Japanese yen to close at 57.69 per 100 yens from 57.86 yesterday. The home unit, however, remained sluggish against the pound sterling and settled at 88.15 per pound from 88.11 earlier.
Elsewhere, pound sterling traded little changed moving in tandem with euro against the US Dollar ahead of mid-day speech from the BoE MPC member Saunders. In forward market today, premium for dollar declined owing to fresh receiving from exporters.
The benchmark six-month premium payable in June eased to 126.50-128.50 paise from 128-130 paise and the far forward December 2018 contract also edged down to 263.50-265.50 paise from 266-268 paise previously.
