The rupee had closed at 73.22 a dollar on Monday and dipped to 72.96 in the intraday trade. Currency dealers say the Reserve Bank of India (RBI) was not seen intervening in the market through a clutch of nationalised banks.
The rupee’s strength was in line with other Asian currencies, which gained as the dollar weakened overnight on the expectation of a prolonged low-rate environment.
Korean won and Taiwanese dollar were the highest gains in Asia. The dollar index, which measures the greenback’s strength against other major currencies, fell 0.41 per cent to 89.79.
According to Sriram Iyer, senior research analyst at Reliance Securities, the absence of RBI in the spot market led to the rupee strength. “Technically, the USDINR Spot pair holds resistances at 73.20 and 73.35. Supports are at 72.90 and 72.70,” Iyer said.
Abhishek Goenka, managing director and CEO of IFA Global, said the rupee’s strength was a broad-based rally, aided by flows.
Currency consultants, however, warn that there is no scope of being complacent as of now, and they are advising their importer clients to hedge at every possible point. Most importers are hedging in the near term, while some are covering for the medium term as well. The forward points have inched up as a result. The one year forward premium rose to Rs 3.86, against Rs 3.84 on Monday.
The rupee has shown resilience against the dollar vis-a-vis its peers in the region. The country ran a current account surplus of $27 billion till February this year. In FY21 till February, India’s net FDI inflow was $41 billion, and FPI $36 billion. The rupee has scope to depreciate, considering it is still one of the strongest currencies in the region against the dollar. Year to date, the rupee has strengthened 0.36 per cent against the dollar, whereas most of the currencies have weakened.
On a one-month basis, the rupee has strengthened 2.5 per cent, the highest in the region.