Rupee Surrenders Early Gains Ahead Of RBI Rate Decision

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Mumbai (PTI):
 The rupee failed to sustain an early strong advance against the US currency and ended lower by 4 paise at 64.19 on bouts of month-end dollar demand from importers and corporates.

Currency traders also preferred to stay on sidelines and avoided taking any long positions as caution displayed ahead of the Reserve Bank of India’s bi-monthly policy on 2 August.

Though, the central bank is expected to lower its key policy rates responding to an inflation rate running well below target, which had eased to its slowest pace in over five years in June.

A small recovery in dollar overseas after plunging fresh multi-month lows also added to the pressure on the domestic currency, though robust capital flows into equities and debt largely cushioned the fall.

The greenbank crumbled near a 2-1/2-year low against the euro in early trade, weighed down by US political uncertainty and uninspiring US data that added to doubts about whether there will be another Federal Reserve rate hike this year.

The rupee had climbed to a 2-1/2 month high on last Thursday following highly dovish Fed rhetoric.

All major Asian and emerging market currencies were able to rally versus the US Dollar last week.

Foreign funds and investors pumped a staggering USD 4 billion into the Indian capital market this month, primarily due to “better prospects” of economic growth as compared to other emerging markets aided by steady progress in monsoon and good corporate earnings.

The latest inflow follows net infusion of Rs 1.6 lakh crore in the previous five months (February-June).

In the meantime, country’s foreign exchange reserves touched a new record high of USD 391.33 billion after it rose by USD 2.27 billion in the week to July 21.

Meanwhile, domestic brouses made a stellar rebound after a brief consolidation phase with both the benchmark indices ending at fresh lifetime high following due to better- than-expected corporate earnings amid expectations of an interest rate cut by the RBI.

The home currency resumed firmly higher at 64.05 from last weekend close of 64.15 at the Interbank Foreign Exchange (forex) market owing to heavy dollar selling by banks and exporters and traded in a tight range most part of the day.

However, rupee suffered a sudden reversal in late afternoon-trade on the back of fresh dollar pressure and drifted back sharply to hit a low of 64.25 before ending at 64.19, showing a loss of 4 paise, or 0.06 per cent.

The RBI, meanwhile, fixed the reference rate for the dollar at 64.0773 and for the euro at 75.2203.

In cross-currency trades, the rupee retreated against the pound sterling to finish at 84.24 from 83.98 per pound and remained weak against the Euro to settle at 75.28 from 75.15.

The local unit also dropped further against the Japanese Yen to close at 58.07 per 100 yens from 57.66 last Friday.

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