Favourable factors on domestic and global fronts took the rupee back to a two-week high on Friday. The rupee recorded two per cent appreciation against the dollar and closed at 55.64, against 56.81 on Thursday.
This was the best single-session gain in about three years. The currency closed with 0.6 per cent gains over last week, its highest weekly gain since the start of this financial year.
It appreciated consistently in one-sided trade through the day, in line with foreign fund inflows and a rise in domestic equity markets.
“Huge dollar supplies were seen from foreign banks and IT companies on Friday,” said a dealer with a forex consultancy firm.
India Forex Advisors said in a note that the recently released draft guidelines on the General Anti-Avoidance Rules helped the rupee gain.
There were foreign fund inflows of Rs 3,046 crore in the equity markets on Friday, according to Bombay Stock Exchange data.
On Friday, the Sensex and the NIFTY closed with 2.5 per cent gains over the previous close.
Euro zone leaders’ decision to help struggling banks and countries, taken at a meeting in Brussels, helped the markets.
“Developments from the Euro zone have contributed to some extent to the rupee’s appreciation on Friday, and domestically also there is expectation building up that some policy measures will be taken,” said Parthasarthy Mukherjee, president-treasury and international banking at Axis Bank.
Reflecting better global risk appetite, the dollar index, that is measured against six major currencies, fell to 82 levels from 82.80 levels a day ago.
Traders said markets will keenly follow the outcome of the European Union Summit that concludes over the weekend. “It is not yet clear if the rupee will be able to sustain at these levels,” said Mukherjee.
On a quarterly basis, however, the rupee closed with a loss of nine per cent against the greenback. The April-June 2012 period was marred with weak growth numbers in India and in developed countries, leaving a dent in investor sentiments.
Activity from the Reserve Bank of India in the foreign exchange market and in its administrative capacity was of little help. Last week, the rupee had fallen to an all-time low of 57.16 against the dollar.