Rupee recovers from 6-month low, ends 2 paise higher amid global volatility

Rupee nosedived to hit fresh six-month low of 65.16 per dollar in mid-morning trade on hardening speculation of widening fiscal deficit

Showing a smart resilience against heightened global volatility, the rupee on Friday clawed back its lost territory to recover from its near-six-month low and ended a marginal 2 paise higher at 64.79 per dollar.

Escalating geopolitical tensions in the face of a fresh war of words between North Korea and the US administration kept overall forex market sentiment highly nervous.

The rupee nosedived to hit a fresh six-month low of 65.16 per dollar in mid-morning trade on hardening speculation of widening fiscal deficit after government indicated a package of stimulus measures to boost exports and revive falling domestic growth.

Aggressive hedging strategy adopted by currency traders and speculators along with strong dollar demand from importers also added pressure on the rupee front amid fears that impending Fed rate hike could accelerate fund outflows.

However, suspected intervention by central bank officials during the day believed to have given the currency a lift in Asia.

In the meantime, dollar's strength continued to put pressure on many emerging and other Asian currencies following Fed's historic meet outcome despite concerns over fresh tensions between the US and North Korea.

However, domestic bourses witnessed a free-fall in over nine months as panic-stricken investors rushed to sell their holdings on the back of worsening geopolitical situations and also impacted by Fed comments on unwinding the quantitative easing.

The flagship Sensex tanked over 447 points to end at 31,922.44, while Nifty ended below the 10,000 mark by sliding almost 158 points to 9,964.40.

Maintaining its extreme bearish undertone, the rupee resumed sharply lower at 64.95 at the Interbank Foreign Exchange (Forex) market.

It soon plunged on hectic dollar demand from corporates and importers to hit a low of 65.16 before staging a spectacular turnaround in mid-afternoon deals.

The home currency touched a fresh intra-day high of 64.75 towards the fag-end trade before ending at 64.79, showing a gain of 2 paise, or 0.03 per cent.

The Indian currency has come down by a whopping 71 paise against the US dollar during the week.

The RBI, meanwhile, fixed the reference rate for the dollar at 64.9596 and for the euro at 77.7566.

The dollar index, which measures the greenback's value against a basket of six major currencies, was marginally weak at 91.81.

However, the broader undertone for the cross currencies remained weak as the rupee dropped further sharply against the pound sterling to end at 87.91 from 87.31 per pound and fell back against the euro to finish at 77.56 from 77.07 earlier.

It also retreated against the Japanese yen to close at 57.85 per 100 yens from 57.60 yesterday.

In forward market today, premium for dollar showed little change owing to lack of market moving factors.

The benchmark six-month premium payable in February softened to 113.25-115.25 from 113.50-115.50 paise, while the far forward August 2018 contract ended virtually stable at 251.50-253.50 paise.

On the international energy front, crude prices edged higher on Friday as the market waited to see whether major oil producers would extend supply cuts beyond March at a meeting in Vienna later in the day.

The International benchmark Brent crude futures fell 2 cents to USD 56.41 a barrel in early Asian trade. The contract closed at $56.43 on Thursday, the highest level since Feb. 23.