Rupee vaults 40 paise to close at a more than 2-month high of 73.29 against dollar

The rupee surged by 40 paise to close at a more than two-month high of 73.29 against the US dollar on Monday, following dovish comments by the US Federal Reserve Chairman on interest rates.

A strong rally in the domestic equity markets and a weak American currency in the overseas markets also supported rupee sentiment.

At the interbank forex market, the local unit opened strong at 73.46 against the greenback and later moved in a range of 73.21 to 73.54 in day trade.

The local unit finally closed at 73.29, the highest closing level since June 14. It had closed at 73.69 on Friday.

The rupee logged its third straight session of gain on Monday. In the three trading sessions, the local unit has appreciated by 95 paise against the US dollar.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading unchanged at 92.68.

"The Indian rupee appreciated against the dollar this Monday, supported by a dovish statement from the Federal Reserve Chairman Jerome Powell, who said that more labour market data was needed before they could begin scaling back bond purchases," said Sriram Iyer, Senior Research Analyst at Reliance Securities.

Powell also said that the US Federal Reserve Bank was still far from pulling interest rates off their record lows.

The currency had initially tested an intraday high of 73.21, its highest level since June 15 on sustained dollar sales by foreign banks, but trimmed gains on dollar bids, likely for the Reserve Bank of India, Iyer noted.

The US Fed chief's speech at the Jackson Hole Symposium was 'dovish' and expressed the hope that the Fed will keep supporting the market with low interest rates, traders said.

"The Indian rupee continued Friday's upward momentum and became the second-best performing currency in the Asian basket," said Dilip Parmar, Research Analyst, HDFC Securities.

The weakness in the dollar, a sharp surge in demand for risk assets, and expectations of high dollar inflows in the coming month through the FDI and FII routes supported the Indian rupee, Parmar added.

"Spot USDINR is expected to head towards the psychological level of 73 once the level of 73.20 breaks and will find resistance at 73.65," he noted.

On the domestic equity market front, the BSE Sensex ended 765.04 points or 1.36 per cent higher at 56,889.76, while the broader NSE Nifty advanced 225.85 points or 1.35 per cent to 16,931.05.

Brent crude futures, the global oil benchmark, fell 0.22 per cent to $72.54 per barrel.

Foreign institutional investors were net sellers in the capital market on Friday as they offloaded shares worth Rs 778.75 crore, according to exchange data. Other Asian and emerging market currencies were mixed this Monday, tracking the weakness of the greenback. The dollar index was flat but remains near 2-week lows in Monday afternoon trade in Asia.

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