The Indian rupee jumped close to its one-month high mark in Tuesday’s intraday session as the currency strengthened 0.3% to 94.87 against the US dollar. The domestic currency opened at the 95 per dollar mark, breached the level, and entered the 94 territory soon after.
According to currency market traders, as quoted by Reuters, this is after the RBI’s likely dollar sale before the opening of the local spot market.
Why is the rupee holding strong in Tuesday’s trade?
The appreciation in the currency follows the big surge in India’s GDP print for Q1. Growth came in higher than expected at 7.8% for the April-June quarter. This surpassed both the Reserve Bank of India’s and private forecasts. Alongside, MSCI-related inflows and contained fiscal slippage provided support for the domestic unit.
“Overall, despite the adverse external backdrop of higher oil and a stronger dollar, robust domestic growth, contained fiscal slippage, RBI support and portfolio-related inflows helped the rupee finish August on a firm note,” said Anil Kumar Bhansali, head of treasury, Finrex Treasury Advisors.
On Monday, the Indian rupee was the third-highest-performing Asian currency after the South Korean Won and Japanese yen.
Dollar index recovers mildly
The dollar index was up 0.07% on the day quoted at 99.47. However, over the past month, the index, which gauges the strength of the greenback against a basket of six other currencies, has declined 0.54%. A soft dollar makes emerging market currencies more appealing for foreign investors.
Domestic equities rise
In Tuesday’s intraday trade, domestic markets were trading in the green as the Sensex was up 206.95 points, or 0.27%, to 77,165.73, while the Nifty was up 0.15% to 24,118.35. A rise in equity markets weighs positively on the currency.
FPIs turn net buyers for two consecutive months
Foreign investors were net buyers of domestic equities for two consecutive months as they purchased equities worth Rs 29,631 crore in August and Rs 20,200 crore in July from the Indian primary markets.
However, on a year-to-date basis, FPIs remain net sellers, having taken out Rs 2.24 lakh crore from the domestic markets, surpassing the previous year’s outflow of Rs 1.66 lakh crore.
