Rupee records best one-day rise against US dollar in nearly 4 months

Adani-related flows, weaker dollar index push Rs up to one-month high

The rupee strengthened sharply against the US dollar on Friday, registering its sharpest single-day rise since November 11, as overseas investors sold the greenback, largely for investment in Adani group shares, dealers said.

An easing in the US dollar index also boosted the Indian currency, which settled at its strongest level since February 3. On Friday, the rupee closed at 81.97 per US dollar as against 82.59 per US dollar on Thursday. So far in 2023, the Indian currency has appreciated 0.9 per cent versus the greenback.

US-based investment company GQG Partners purchased shares worth Rs 15,446 crore (around $1.9 billion) in Adani Group companies, including Adani Ports and Adani Green Energy. Adani Group jumped 10 per cent after the deal.

“The broad trigger was the inflow for Adani stocks, I wasn’t expecting the rupee to strengthen past 82/$1 right now. The rupee also typically gains from seasonal factors in March as corporates close accounts, but I don’t see much sustained strength from here as the view on US interest rates is still not favourable. The broad range would be 82-83/$1,” said Bhaskar Panda, executive vice-president of overseas treasury, HDFC Bank.

With the domestic currency strengthening sharply on the back of dollar sales for investment in Adani stocks, some currency traders took advantage of an arbitrage opportunity stemming from higher offshore dollar/rupee rates vis-à-vis the onshore market. 

The trade, which involved selling dollars in the domestic market, amplified the rupee’s gains, dealers said.

The sudden surge in the rupee on Wednesday also triggered several technical losses for those betting on the dollar, further pushing up the local unit.

“Lumpy flows and stop loss selling pushed the pair lower. Over the next week, USD/INR is expected to trade within a range of 81.70 and 82.30 on spot,” said Anindya Banerjee, vice-president (currency derivatives & interest rate derivatives) at Kotak Securities.

The US dollar index, which measures the American currency against six major rival currencies, eased to 104.77 at 3:30 pm IST on Friday as against 105.03 at previous close, Bloomberg data showed.

The index, which was around the 102 mark at the end of January, has strengthened sharply over the last few weeks as various US data sets, including those on inflation and business sentiment, warranted continued rate hikes by the Federal Reserve. Higher US interest rates lead to a stronger dollar, exerting pressure on emerging market currencies such as the rupee.

Over the past couple of weeks, the RBI is said to have been selling dollars heavily to protect the rupee, which just earlier this week was close to breaching the 83 per dollar mark for the first time in four months.

“Rupee appreciated to 81.90 as flows from Adani Group kept the dollar on the downside despite the fact that Asian currencies have not appreciated at all and dollar index was still at 104.70,” Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors said.

“Rupee is expected to be in a range of 81.50 to 82.50 in the coming days as RBI may step in to recoup its sold dollars and oil companies may continue their buying,” he said.