The rupee strengthened by 9 paise to close at 73.24 against the US dollar on Thursday, supported by positive domestic equities and weak American currency. At the interbank forex market, the rupee traded in a narrow range. It opened at 73.29 against the American currency and gained further ground to settle at 73.24, up 9 paise from its previous close of 73.33.
This is the second consecutive session of gain for the rupee. Traders said investors are cautious ahead of the RBI Monetary Policy Committee (MPC) decision on Friday.
The newly-constituted MPC of the Reserve Bank began its three-day deliberations on Wednesday. The decision of the rate-setting panel will be announced on October 9. Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.05 per cent to 93.57.
On the domestic equity market front, the 30-share BSE benchmark Sensex ended 303.72 points, or 0.76 per cent, higher at 40,182.67. The broader NSE Nifty climbed 95.75 points, or 0.82 per cent, to finish at 11,834.60. Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 1,093.81 crore on Wednesday, according to exchange data.
“Rupee extended its gains for the second successive session following a sharp surge in domestic and global equities. Volatility as such remained low ahead of the important RBI policy statement that will be released tomorrow,” Gaurang Somaiya, Forex & Bullion Analyst at Motilal Oswal Financial Services, said.
Expectation is that the central bank could keep rates unchanged but market participants will be keeping an eye on the stance that RBI adopts for inflation. “We expect USDINR (Spot) to quote in the range of 73.05 and 73.50, Somaiya commented. Sriram Iyer, Senior Research Analyst at Reliance Securities said that the rupee appreciated due to a decline in the dollar index. The dollar index was down 0.08 per cent against rivals this Thursday afternoon trade.
Lack of any major triggers kept the local currency in a narrow trading band on Thursday. Devarsh Vakil, Deputy Head Retail Research, HDFC Securities said that market participants are eyeing on RBI Monetary policy meeting outcome. “No change is expected in interest rates but guidance regarding future path of inflation and growth will remain in focus.”
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