Rupee Notches Up Gains Against Dollar Amid US Midterm Polls

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Rupee Notches Up Gains Against Dollar Amid US Midterm Polls
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The rupee rose to 81.39 in early trade on today, its highest since October 4. (File)

New Delhi:

The rupee may strengthen to the 80-81 level in the short-term against the dollar as the US currency has weakened amid midterm polls there.

“We expect the USD-INR to trade with a negative bias and quote in the range of 80.80 and 82.50,” said Gauarng Somaiya, Forex & Bullion Analyst with Motilal Oswal Financial Services.

Investors are awaiting key US inflation numbers due tomorrow. Consumer prices may provide clues on whether the Federal Reserve could soften its aggressive interest rate hikes.

According to Rahul Kalantri, Vice President, Commodities, Mehta Equities, the dollar-rupee pair continues to sustain below 82.55 and could see further weakness towards 81.80-81.50 levels.

The rupee rose to 81.39 in early trade on today, its highest since October 4. The domestic currency has gained over 1.5 per cent in three trading days to Wednesday, Reuters reported.

“The rupee extended its gains after profit taking in the dollar index. Gains in the domestic equity markets and FII inflows supported the rupee,” said Rahul Kalantri.

Foreign institutional investors (FIIs), who had been away from equities, have just returned this month, and additional buying could support the rupee in the short term, Gauarng Somaiya said.

India’s foreign exchange reserves, meanwhile, went up last week. According to the Reserve Bank of India data, forex reserves increased by $6.561 billion to reach $531.081 billion for the week ended October 28.

The forex reserves had reached the all-time high of $645 billion in October last year. The reserves have been declining of late as RBI has been using the reserves to spruce up the rupee which had plunged into all-time low of 83 compared to the dollar.

“The RBI has been actively intervening to curtail the volatility for the rupee and in the last few months’ reserves have depleted by over $100 billion but last week some revaluation impact did lead to an addition of $6 billion in the reserves number,” said Gauarng Somaiya.

At this point, depleting reserves would not be of a major concern, and the huge war chest was built up to fight this kind of situation, he added.

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