Rising for the sixth straight session, the rupee spurted 24 paise to end at a nearly four-month high of 73.07 against the US dollar on the last day of the year on Thursday, supported by a weak American currency and rise in risk appetite.

Traders said market sentiments improved on hopes of global economic recovery following the rollout of Covid-19 vaccines and extraordinary fiscal and monetary stimulus.

At the interbank forex market, the domestic unit opened at 73.15 against the US dollar and witnessed an intra-day high of 73.01 and a low of 73.17.

The local unit finally settled at 73.07, registering a rise of 24 paise over its previous close.

The rupee had last closed above this level on September 2 this year, when it had finished at 73.03.

In the last six trading sessions, the Indian rupee has gained 77 paise.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.09 per cent to 89.59.

“Rollout of vaccine strengthened hopefulness that surging infection cases may be checked. Additionally, UK granted emergency use authorization for vaccine developed by University of Oxford and AstraZeneca PLC,” said Saif Mukadam, Research Analyst, Sharekhan by BNP Paribas.

Furthermore, rupee may gain strength on consistent FII inflows. Rupee may trade in the range of 72.75 to 73.65 in next couple of sessions, he added.

Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 1,135.59 crore on Thursday, according to provisional exchange data.

Brent crude futures, the global oil benchmark, fell 0.21 per cent to $51.52 per barrel.

"2020 has been a year where RBI played an extremely important role of keeping volatility in check. They sold aggressively when USD rose in value during COVID panic of March-April.

"Then they bought close $100 billion to prevent rupee from appreciating when inflows gushed to Indian capital markets," said Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives, Kotak Securities.

Banerjee further said "during 2021, if the global trend of USD remains downward, then USD-INR can decline towards 70.00 levels".

Rupee dropped 2.39 per cent against the USD in 2020. This will be the third straight year of decline for the domestic currency.

“It is one of the worst years for the Indian Rupee among its Asian peers. The fall in INR vs the USD is despite record inflows from FIIs/FPIs in the Indian equity market and other PE investments,” said Nish Bhatt, founder and CEO of Millwood Kane International, an investment consulting firm.

The regular market intervention by the RBI to absorb the excess dollar flows is one of the reasons behind depreciating rupee despite strong inflows.

“As we approach the year 2021, the rupee movement will be guided primarily by the RBI intervention in the currency market to keep the INR in check. The RBI forex reserves are near all-time high levels.

"Any fall or softening in the prices of crude oil will support the rupee as India imports the bulk of its oil requirements. The pledge by global central banks to keep

.

India''s forex reserves swelled up by $123.66 billion to $581.13 billion in the calendar year.

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