Rupee sees highest single-day rise against US dollar in two months

The Indian rupee appreciated further on Thursday to touch the day’s high of Rs 82.36 per US dollar, registering highest gain in a day after around two months, on the back of corporate dollar inflows in the domestic equity coupled with a positive sentiment among investors due to lower than expected US purchasing managers’ Index (PMI) data, dealers said.

The rupee settled at Rs 82.57 a dollar, against Rs 82.68 per dollar on Wednesday.

Moreover, commercial banks wound up their positions in the Non-Deliverable Forward (NDF) market, and refrained from taking fresh positions followed by the speculated direction from the RBI, which further aided the Indian unit.

However, the Indian currency gave up some gains by the end of the trade as the Reserve Bank of India stepped in the foreign exchange market through dollar purchases in order to contain volatility, dealers said.

“USDINR (US Dollar Indian Rupee) spot closed at 11 paise lower at Rs 82.57 a dollar on the back of corporate dollar inflows and long liquidation from speculators. However, some demand for dollars was noted from importers at lower levels. Over the near term we expect a range of Rs 82.20 to Rs 82.80 a dollar on spot,” Anindya Banerjee, VP - Currency Derivatives & Interest Rate Derivatives at Kotak Securities Ltd said. “The RBI bought dollars in the market today (Thursday). They could have bought around $500 million,” Banerjee added.

Market now eyes the US Federal Reserve Chairman Jerome Powell's speech in Jackson Hole Symposium on Friday. “If the Powell’s speech will be on the hawkish side, then the rupee might again touch the Rs. 83 a dollar level, otherwise it should remain in the current range,” a dealer at a state-owned bank said.

Meanwhile, the banking system’s liquidity deficit persisted due to the RBI’s move to withhold a significant portion of banks’ surplus funds. Liquidity in the banking system went into deficit mode on Tuesday for the first time in the current financial year.

The imposition of incremental cash reserve ratio (I-CRR) by the RBI, coupled with outflows on the account of GST payments starting this week weighed on the liquidity in the banking system.

According to RBI data, the central bank injected Rs 23,111 crore on Wednesday, followed by Rs 23,644 crore, and Rs 15,552 on Monday and Tuesday respectively.