Rupee appreciates beyond 85 per dollar, pares gains on RBI intervention

The rupee gained as the dollar index fell, but pared gains to close at 85.09 per dollar amid likely dollar buys by the RBI through state-run banks

The rupee appreciated beyond the 85 mark to 84.78 per dollar on Monday on the back of a fall in the dollar index. However, it trimmed some gains by the end of the trade as state-owned banks bought dollars — likely on behalf of the Reserve Bank of India — said dealers.

 

The local currency settled at 85.09 per dollar, against the previous close of 85.22 per dollar.

 

“The volume was low today because there was a holiday in the US — that could be one of the reasons for the volatility,” said a dealer at a state-owned bank. “The RBI was there after the movement in the morning,” he added.

 

 

The dollar index fell by 0.5 per cent to 99.35 on Friday. It measures the strength of the greenback against a basket of six major currencies. 

 

“The Indian rupee commenced the week favourably, bolstered by an appetite for risk and a subdued US dollar. The greenback continued to face downward pressure, stemming from escalating trade concerns, elevated bond yields, and mixed economic indicators. In the absence of significant international catalysts, the rupee largely mirrored the US dollar’s movements, confined to a tight trading band amid US and UK holiday. Looking ahead, the spot USDINR pair is anticipated to fluctuate between 84.60 and 85.30 in the near term,” said Dilip Parmar, Senior Research Analyst, HDFC Securities.

 

The rupee has appreciated by 0.6 per cent in the current calendar year and 0.5 per cent in the current financial year.

 

However, so far in May, the rupee has depreciated by 0.7 per cent against the US dollar. It was one of only three Asian currencies to weaken against the greenback during the month and ranked as the second-worst performing emerging market currency, after the Hong Kong dollar.

 

The rupee saw a sharp depreciation at the beginning of the month, despite a decline in the dollar index, as foreign investors withdrew from domestic markets amid escalating tensions between India and Pakistan.