Rupee ascends to 5-week high on stocks rally, trade optimism

The rupee appreciated by 4 paise to close at a five-week high against the US dollar on Monday driven by sustained foreign fund inflows and hopes of a partial trade deal between the US and China.

Stock markets rising for a seventhstraight day also boosted the sentiment.

At the interbank foreign exchange market, the rupee opened strong at 70.55 against the previous close of 70.81 to the US dollar.

The domestic unit, later, gave up gains to settle at 4 paise higher at 70.77, a level not seen since September 27.

Rising crude prices and a strong dollar against major global currencies restricted the rupee's gain, dealers said.

"Global sentiment remains mixed to slightly positive...In India, astute liquidity management by the RBI along with the recent corporate tax cut and murmurs of further tax rationalization across various asset classes has made the economic prospects even more attractive.

"This has resulted in 'overflowing' inflows from FIIs and has propped up the rupee vs US dollar, notwithstanding the better-than-expected jobs data in the US, as well as other peer emerging nations as well," Validus WealthChief Investment Officer Rajesh Cheruvu said.

Continuing their buying streak for the second straight month, overseas investors pumped in a net Rs 16,464 crore into the Indian capital markets in October amid positive domestic and global cues.

Foreign portfolio investors (FPI) pumped in a net Rs 12,475.7 crore into equities and Rs 3,988.9 crore into the debt segment during October 1-31. This translates into a total net investment of Rs 16,464.6 crore in the domestic capital markets.

"Rupee hits the highest level in five weeks following record forex reserves and risk on sentiments on hope of the US-China trade deal. ICE Dollar fell to three-month lows along with treasuries and U.S. stocks rose to record highs after an unexpectedly strong US jobs report in Friday's trade.

"Near term bias for USDINR remain bearish and could test the level of 70.32, the 100-DSMA which is adjacent to ascending trend-line formed from July low and find resistance around 71.10," V Sharma, Head PCG & Capital Markets Strategy, HDFC Securities, said.

Meanwhile, BSE Sensex settled 136.93 points, or 0.34 per cent, higher at 40,301.96. The index also hit its lifetime intra-day high of 40,483.21.The broader NSE Nifty too advanced 50.70 points, or 0.43 per cent, to close at 11,941.30.

The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.06 per cent to 97.30. Brent crude futures, the global oil benchmark, surged by 1.54 per cent higher at USD 62.64 per barrel.

The 10-year government bond yield was at 6.48 per cent.