Rupee sees biggest single-day gain since Oct 12, up 56 paise at 93.88

Rupee turned into the best performing currency Asia for the week.

The currency also touched a six-month high during the session, taking its weekly gains to nearly 1.2% and making it the best Asian currencies. A softer dollar and easing concerns over import cost also supported investor sentiments, said traders who also attributed the seven days of equity markets surge as another contributing factor.

At the interbank foreign exchange market, rupee opened at 94.50 and touched an intraday high of 93.82 and a low of 94.50 and closed the session at 93.88 registering a gain of 56 paise.

Dilip Parmar, research analyst at HDFC Securities, told TNIE that rupee outpaced all Asian peers, scoring its biggest single-day surge since October 12 to hit a six-month peak.

“Fueled by heavy foreign inflows and sliding crude prices, market sentiment went into overdrive amid a parabolic rally in domestic equities sparked by the buzz around the ‘anti-AI’ trade and ease of geopolitical uncertainties. In the near term, spot rupee-dollar pair is expected to head south with support at 93.50 and resistance ticking in at 94.30.”

Meanwhile, the RBI rupee defence has the foreign reserves dropping for the eighth week in a row. For the week to October 30, the reserves declined by $2.69 billion to a low $717 billion. In the previous week, the forex kitty had come down by $1.269 billion.

The reserves had touched an all-time high of $785.706 billion in the week to September 4, driven by a heavy flow of currency as part of a special concessional swap for deposits from the diaspora through which banks raised a record $133 billion, but have been on a decline ever since and have lost as much as $68.7 billi0n since then.

The rupee has now recovered to levels last seen around October 12, when RBI governor Sanjay Malhotra said markets are overly pessimistic about the rupee and reiterated his optimism about the medium- and long-term balance of payments position of the country.

Dealers said foreign banks were seen selling dollars on behalf of foreign portfolio investors, adding to the upward momentum. However, the Reserve Bank was also seen buying dollars around the 93.88 level, checking further appreciation.

 The rupee emerged as the best-performing Asian currency on the day, appreciating 0.6% against the dollar and outperforming all its regional peers. On a year-to-date basis, however, it is still down 4.3%, while its one-year performance reflects a decline of 5.6%. The currency has gained 0.96% far in the current financial year.

 The return of foreign investors to the doemstic equities comes after several months of sustained withdrawals. Between January and October 31, they have ripped the domestic equities of a whopping Rs 3.5 trillion. Bust in the past seven sessions they have net invested around $3 billion, including $1.6 billion on Thursday, their largest single-day purchase in nearly six years.

 Falling crude oil prices have provided additional support to the rupee. Brent crude has declined nearly 20% this week amid hopes of a possible resolution to the Iran conflict.