Rupee hits fresh 16-month high, up 13 paise at 65.69

The domestic currency has risen 2.23% since the beginning of the year

The rupee continued its stellar run against the dollar to finish at a fresh 16-month high of 65.69 on Wednesday as exporters aggressively offloaded the US currency ahead of the Fed meet outcome.

Massive capital inflows on hopes of more reform measures following BJP's strong showing in the recently held state elections spurred the rupee's biggest rally since early 2015.

The domestic currency has risen 2.23 per cent since the beginning of the year.

Reacting to market specific developments, the home currency resumed on a strong footing at 65.76 from Tuesday's closing level of 65.82 at the Interbank Foreign Exchange (forex) market.

It gained further to hit a high of 65.41 on heavy dollar unwinding by banks and traders.

However, traders said the RBI's intervention through state-run banks capped the steep rise. The surging rupee is a headwind for exporters.

Retreating from its intra-day high, the home unit finally settled at 65.69, showing a smart gain of 13 paise, or 0.20 per cent.

The RBI, meanwhile fixed the reference rate for the dollar at 65.5146 and for the euro at 69.6224.

The resurgent rupee had rallied overnight by a hefty 78 paise — its biggest single day spike in recent past — to end at 65.82 in the aftermath of the decisive win for the BJP in Uttar Pradesh polls.

The BJP's thumping victory in Uttar Pradesh and substantial gains made in other states will facilitate reforms as the ruling party inches closer to a majority in the Rajya Sabha, Moody's Investors Service said in a statement.

Meanwhile, domestic bourses took a breather after yesterday's surge and ended marginally lower.

Foreign funds net infused a massive Rs 4,087.89 crore in domestic equities on Tuesday, according to stock exchange data.

On the global front, the greenback traded little changed against major counterparts ahead of interest rate decision from Federal Reserve even as investors' awaited cues on the central bank's future monetary policy.

The US dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was trading lower at 101.45.

In cross-currency trade, the rupee fell against the British pound to end at 80.05 from 79.84 and drifted against the Japanese Yen to finish at 57.31 per 100 yens from 57.26 earlier.

It, however, remained firm against the euro to close at 69.76 compared to 69.99 on Tuesday.