₹ Rises To 5-week High Even As Fm Denies Its ‘collapse’ | Mumbai News

MUMBAI: The rupee rose to a five-week high on Tuesday to strengthen at 78 levels, forcing the central bank to change tack and buy dollars to prevent an appreciation. The rebound occurred even as the finance minister Nirmala Sitharaman asserted that there was no collapse of the rupee and that it was finding its natural level.
The rupee ended the day at 78.72, up 31 paise from its previous close of 79.03 after touching a high of 78.49 in the interbank foreign exchange market. Dealers said that the sharp rally triggered the stop-loss set by exporters and caused further dollar sales.
Replying to a supplementary in the Rajya Sabha, Sitharaman said that the RBI intervention is not to fix the value of the rupee but to contain the volatility. The finance minister also reiterated that the rupee has seen more fluctuations against the dollar but has outperformed its peers.

“Today was a good day for the rupee with a huge selloff in the overseas non-deliverable forward (NDF) market,” said K N Dey of United Financial Consultants. He added that the RBI was unlikely to allow the rupee to appreciate, given the current account deficit and the high level of imports. “The rupee is likely to remain range-bound between 78.50 and 79.50, with a possibility of a breakout to 80 if China-Taiwan tensions escalate. Also, bond yields have come off in the market, in line with the dip in US bond yields. A 75-basis-point hike (100bps = 1 percentage point) by the US Fed in September no longer looks certain,” said Dey.
Dealers said that the selling in the NDF market was a pointer to expectations that some inflows are expected. NDF refers to the derivative bets placed offshore on the rupee, which are settled in dollars without giving rupee delivery. While equity markets ended flat after a volatile session, crude oil dropping below $100 was a positive for the rupee.
“The recent gains in the rupee have been led by the decline in crude oil prices, FPI inflows and robust economic data, even as geopolitical risks are weighing on market sentiments. However, we expect any further sharp gains will be limited with the RBI stepping on the dollar buying side and as global risk appetite remains fragile,” said Kotak Mahindra Bank chief economist Upasna Bhardwaj.
Bankers expect that with bids for the 5G auction topping Rs 1.5 lakh crore, there will be an inflow of foreign capital. However, these are expected to be in phases over a period of time.