Single biggest daily gain for Rupee against dollar
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New delhi, Jul 30: With the dollar weakening further in the wake of US Fed Reserve chairman Jerome Powell’s dovish comments, the rupee on Friday rallied against the greenback and posted its single biggest daily gain in about a year.
The rupee ended the session at 79.26, 0.6% stronger than Thursday’s close of 79.7550, a gain of 45 paise. Friday’s gain came on the back of a 22 paise appreciation on Thursday.
Several other Asian currencies also strengthened against the dollar as US treasury yields fell and the greenback slipped to a near six-week low against the yen. The dollar index, which measures the greenback’s strength against a basket of six currencies, slipped 0.21% to 106.13. The benchmark 10-year bond yield closed Friday’s session at 7.3196%, compared with Thursday’s close of 7.3316%. While the Indian currency had slipped below the 80-mark against the dollar on July 21, it has since regained lost ground led by helpful factors, including portfolio inflows into the stock market and the softening in the prices of some commodities. Reserve Bank of India (RBI) governor Shaktikanta Das said last week the central bank has zero tolerance for volatile movements in the currency. Currency market dealers say that while the dollar has given up some strength following the Fed Chair’s observations, it was possible the greenback might regain its value as money moves to a safe-haven currency. However, the rupee could get good support from fresh foreign capital inflows, if they sustain.
The Federal Open Market Committee raised the policy Fed Funds rate by 75 bps in the range of 2.25-2.5% but also stated in a clearly dovish sentence: “Recent indicators of spending and production have softened”. Powell also stated that “it will become appropriate to slow the pace of increases” in the policy rate “while we assess how our cumulative policy adjustments are affecting the economy and inflation”.