Rupee appreciated to 3-week high tracking the rise in Euro post announcement of German court ruling. All eyes are now on the US Federal Reserve meeting. Rupee is expected to strengthen more in case of a favourable outcome from the meet.
On Wednesay, rupee closed at 55.23 per dollar, 12 paise or 0.2 per cent higher than its previous close. The Indian currency is expected to go beyond 55 levels tomorrow.
The German court on Wednesay gave its approval to the rescue fund for Euro zone. The US Federal Reserve is scheduled to meet tonight and is expected to announce another round of quantitative easing. “Rupee has been following Euro. Basically, more liquidity means one can expect more flows in emerging markets,” said Harihar Krishnamoorthy, treasurer at FirstRand Bank in India. He added that rupee may touch 55 levels against the greenback after the US Federal Bank meeting.
The Euro rose to four month high level of $1.29 on Wednesay. Also dollar weakness globally helped rupee gains during the day. The dollar index as measured against six major currencies of the world fell to below 80 levels.
Also, inflows from foreign institutional investors (FIIs) helped the Indian currency.
“The flows from FIIs is helping meet dollar demand from domestic oil companies,” said Sandeep Gonsalves, forex consultant and dealer at Mecklai & Mecklai. He said rupee may appreciate to 54.75 per dollar tomorrow.
FIIs net invested Rs 451 crore in Indian equity markets on Wednesay, as per data from the Bombay Stock Exchange. Both Sensex and Nifty were up about 0.8 per cent. The Sensex closed above the psychological mark of 18,000 points.
As a result, rupee traded in the narrow range of 55.15-55.34 against the dollar on Wednesay. “The strong gains in rupee were much anticipated ahead of these two important events today,” said India Forex Advisors in a note.