Rupee rises by 8 paise as govt starts to unlock economy

·3-min read

Mumbai, Jun 1 (PTI) The rupee appreciated 8 paise to close at 75.54 against the US dollar on Monday on easing trade worries and optimism over the government's move to reopen the economy after a more than two-month lockdown.

Forex traders said foreign fund inflows, weak American currency and positive domestic equities also boosted investor confidence.

The rupee opened higher at 75.32 at the interbank forex market. The local unit shuttled between 75.29 and 75.60 in day trade before ending at 75.54 against the US dollar, up 8 paise over its last close.

It had settled at 75.62 against the US dollar on Friday.

The government on Saturday said a phased exit would begin on June 1 from the over-two-months-long nationwide lockdown.

Announcing the new guidelines, the home ministry said a complete lockdown would continue till June 30 in areas identified as COVID-19 containment zones across the country, but restrictions would be lifted in a phased manner at other places after the ongoing fourth phase.

Easing trade worries as US President Donald Trump stopped short of specifying tough sanctions over China's new national security law for Hong Kong boosted the rupee sentiment.

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell by 0.37 per cent to 97.98.

'One important highlight of the day is that 12 Indian banks started trading in the offshore rupee NDF markets.

'The most ambitious step to get a tighter grip on rupee trading, which has been shifting to markets like London and Singapore, is being put to the test as the nation's banks start trading the currency in offshore markets,' said Devarsh Vakil, Head Advisory, HDFC securities.

Vakil further added that the benefit of the same will be seen in coming months if volumes shift to domestic markets.

The Reserve Bank in March had allowed banks to participate in offshore non-deliverable forward (NDF) rupee markets with a view to contain volatility in the domestic currency. The decision was effective from June 1, 2020.

Traders further said rising coronavirus cases and weak GDP data weighed on investor sentiment.

India's GDP growth tumbled to 3.1 per cent in the March quarter -- the slowest pace since the global financial crisis more than a decade back. In 2019-20, the Indian economy grew by 4.2 per cent, the slowest in 11 years.

Indian stock indices rallied more than 2 per cent, extending gains for the fourth straight session. The 30-share BSE Sensex settled 879.42 points or 2.57 per cent higher at 33,303.52. The NSE Nifty surged 245.85 points or 2.57 per cent to finish at 9,826.15.

Brent crude futures rose 0.69 per cent to USD 38.10 per barrel.

The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 75.6369 and for rupee/euro at 83.9146. The reference rate for rupee/British pound was fixed at 93.3127 and for rupee/100 Japanese yen at 70.56. PTI DRR MR MR