The rupee today staged an incredible comeback after its three—session lustreless trade and ended at a fresh two-and-a-half month high of 64.11 a dollar after the US currency took a big knock amid the Fed indicating it will maintain a slow pace of monetary tightening. The Federal Reserves’s statement came after the two-day policy meet where the central bank kept key policy rates unchanged but expected to begin winding down its huge bond holdings soon. The domestic currency appreciated by a solid 26 paise, or 0.40 per cent. This is the highest closing for the home currency since May 16, when it had settled at 64.08.
The beleaguered dollar took a battering against its all major rivals including emerging market currencies and crashed to a fresh 13-month lows after a dovish tone from the Fed allowed investors to push back rate rise bets and extend the recent risk-taking mood. Uncertainty surrounding the outcome of the Fed’s policy decision had made currency markets nervous across the globe recently. The Indian rupee was the best-performing currency in Asia today. Heavy dollar unwinding by speculative traders in the face of abundant capital inflows supplemented further strength to the local currency. Bearish traders and investors largely dumped dollar post FOMC outcome with the currency becoming increasingly sensitive to monetary policy speculations, a forex dealer commented.
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In the meantime, bourses retreated sharply after scaling fresh historic highs after option expiration triggered chaotic volatility even as cautious investors booked profits in select heavyweight stocks due to rich valuations amid disappointing earnings by pharma major Dr Reddy’s lab.The home currency resumed with a gap-up at 64.22 as against overnight close of 64.37 at the Interbank Foreign Exchange (forex) market tracking overnight developments also supported by record breaking rally in local equities. It gained further ground to hit a fresh intra-day high of 64.06 and largely consolidated gains throughout the session before ending at 64.11, revealing a smart gain of 26 paise, or 0.40 per cent.
The RBI, meanwhile, fixed the reference rate for the dollar at 64.1216 and for the euro at 75.2082. In cross-currency trades, the rupee dropped further against the pound sterling to settle at 84.23 from 84.07 per pound and fell back against the euro to finish at 75.05 from 74.96 yesterday. The local unit, however, remained firm against the Japanese yen to end at 57.58 per 100 yens from 57.61 earlier. The dollar index, which measures the greenback against a basket of currencies, was down at 93.50 during Asia trade – its lowest since May last year. In forward market today, premium for dollar showed showed a modest rebound.
The benchmark six-month premium payable in December firmed up to 120.5-122-5 paise from 123-125 paise and the far forward June 2018 contract also edged higher to 266.5-268.5 paise from 268.5-270.5 paise on Wednesday. On the International commodity front, crude prices climbed further and picked up a bit of steam late in the session as the USD pushed back toward 14-month lows.