The domestic currency settled at 82.83 per US dollar on Wednesday, its strongest closing level since September 4, 2023, Bloomberg data showed. On Tuesday, the rupee had closed at 82.90 per US dollar.
Data released on Tuesday after Indian market hours showed that US February Services PMI was lower than market expectations, pushing the dollar index down 0.2%. Weak US economic data strengthens market hopes of the Federal Reserve cutting interest rates sooner than later.
Currency traders and analysts said that steady inflows into debt and equity markets had bolstered the rupee over the past few weeks, with a sharply higher-than-expected domestic GDP print and Bloomberg’s decision to include Indian bonds in one its indices boosting the view on local assets.
From February 6 to March 6, the rupee has fared better versus the US dollar than eight other Asian currencies, with the local unit having gained 0.3% versus the greenback over the time period, Bloomberg data showed. Only the Malaysian ringgit and the Philippine peso performed better than the rupee.
“Dollar flows, and improved risk sentiments are key factors for the rupee’s action. We are expecting 82.60/$1 in the coming days while 83.15/$1 remains a near-term hurdle,” said Dilip Parmar, research analyst, HDFC Securities.Foreign portfolio investment in Indian stocks and bonds was at $3.8 billion in February and $908 million so far in March, data released by NSDL showed. Traders said dollar purchases by the RBI amid the foreign flows had ensured that the rupee’s appreciation was an orderly one while helping the central bank further build its foreign exchange reserves.
