Rupee firms up by 7 paise to 64.89 a dollar on sustained dollar selling

Strengthening for the third-straight day, the rupee appreciated by another 7 paise to close at a new one-week high of 64.89 against the US currency due to sustained dollar selling by exporters and banks.

The home currency has gained on the back of broad dollar weakness along with highly bullish macroeconomic indicators and political stability.

Though forex market volatility still persists in the midst of a sharp sell-offs in local equities amid worsening rhetoric of a trade war.

The Indian unit has recovered by a smart 28 paise in last three trading sessions after falling to a three-month low last week.

Foreign institutional investors (FIIs), who took a small break from buying Indian shares in last few trading sessions, bought shares of Rs 620.08 crore yesterday, helping ease some pressure.

Trading has been thin and confined to extremely narrow range in the absence of any market moving factors.

Meanwhile, the US dollar is broadly pressured against its major peers against the backdrop of White House economic advisor Gary Cohn's resignation amid political uncertainty.

The rupee resumed higher at 64.89 against overnight close of 64.96 at the inter-bank foreign exchange market (forex) largely tracking dollar weakness.

After briefly falling to a low of 65.01 in mid-morning deals, the home unit bounced back to hit a fresh session's high of 64.86 on greenback sales by state-run lenders.

It finally ended at 64.89, revealing a gain of 7 paise, or 0.11 per cent.

The RBI meanwhile fixed the reference rate for the dollar at 64.9627 and for the euro at 80.7486.

In the international energy front, global crude prices took a knock, pulled down by weaker stock markets after a key advocate for free trade in the US government resigned, stoking concerns Washington will go ahead with import tariffs and risk a trade war.

Soaring US crude oil production and rising inventories also dragged on crude prices, traders said.

Brent crude futures were trading at $65.38 a barrel in early Asian trading.

In the meantime, the broad-based domestic market rout intensified with key indices tumbling sharply to fresh multi month lows fuelled by heightened concerns over the health of the country's banking system in the wake of the PNB fraud even as risk aversion rolled into Asia, with major benchmarks being a sea of red despite positive developments in the Korean peninsula.

This was the sixth-straight session fall for the Indian bourses.

The flagship BSE Sensex tanked 284 points to close at 33,033.09, while Nifty plunged over 95 points to 10,154.20.

Globally, the US dollar hovered near a 14-month low against the yen as the departure of a top economic adviser to US President Donald Trump raised concerns that tensions over a global trade war were entering a new heightened phase.

The dollar index, which measures the greenback's value against a basket of six major currencies, was up at 89.59 in early trade.

In cross-currency trades, the rupee recovered against the pound sterling to end at 89.96 per pound from 90.19 but remained under pressure against the euro and settled at 80.63 from 80.45 yesterday.

The local unit also fell back against the Japanese yen to close at 61.44 per yens from 61.08 earlier.

Elsewhere, the euro climbed to a new two-week high and remained optimistic against the US dollar ahead of the much awaited ECB meet tomorrow to make its rate decision.

The British pound, however, turned bearish against the greenback after a three-day rally even as post Brexit relationship policy speech from UK Prime Minister Theresa May brought temporary truce in the UK politics.

In forward market today, premium for dollar firmed up due to fresh paying pressure from corporates.

The benchmark six-month forward premium payable in August edged up to 125-127 paise from 123.50-125.50 paise and the fag-forward February 2019 contract also moved higher to 243-245 paise from 239.50-241.50 paise previously.