Rupee takes U-turn, recovers 10 paise against US dollar

The beaten-down rupee on Friday staged a good show by recuperating 10 paise to end at 68.60 against the US dollar in line with a stellar rally in domestic equities despite ongoing global trade war jitters.

The domestic unit yesterday plunged by 27 paise to hit a one-week low of 68.70.

On Friday, however, steady unwinding of dollars by banks and corporates ahead of the key US labour data too supported the late upmove in the Indian currency.

The Forex market sentiment got revived towards the fag-end trade largely tracking strength in local shares and falling global crude prices that helped offset early steep losses in the Indian rupee.

The domestic unit swung between a high of 68.60 and a low of 68.84 against the American dollar during the day.

Meanwhile, bulls staged a spectacular comeback as stocks rallied with vigour and strength on wave of frenzied buying amid promising Q1 earnings growth outlook, lifting the Nifty to another historical close.

On the energy front, crude prices drifted after China announced it would impose tariffs on USD 60 billion in US goods, the latest development in an escalating trade dispute that has raised concerns about a slowdown in economic growth.

The Benchmark brent for September settlement traded sharply lower at USD 73.43 a barrel in early Asian trade.

Yuan dipped further after an aggressive devaluation from the PBOC on Friday with the Chinese currency depreciating beyond record low of 6.89 against the greenback. The People’s Bank of China is devaluing its currency in response to the trade war.

Earlier, the rupee opened almost flat at 68.69 from overnight close of 68.70 at the Interbank Foreign Exchange (Forex) market.

But, it eventually lost uptrend support and drifted sharply to hit an intra-day low of 68.84 in mid-afternoon deals.

The local unit, however, regained lost ground in the second half of the session owing to some fresh US dollar selling heading into the US labour market report due later today and managed to close at the session high of 68.60, showing a gain of 10 paise, or 0.15%.

For the the week, the rupee appreciated by a little 5 paise.

The Financial Benchmarks India private limited (FBIL), meanwhile, fixed the reference rate for the dollar at 68.7933 and for the euro at 79.6746.

The bond markets, however, remained under pressure for the second straight day on expectations that the RBI may hike key policy rates higher again in order to keep inflation in check. The 10-year benchmark bond yield rose 4 bps to 7.76%.

Globally, the US dollar continued to hold against other major currencies, as trade tensions between the US and China lingered after reports that the White House plans to propose 25% instead of 10% on USD 200 billion of imported Chinese goods.

The greenback was boosted after the Fed left interest rates unchanged on Wednesday, as expected.

Against a basket of other currencies, the dollar index is up at 94.90.

In the cross currency trade, the rupee also recovered against the pound sterling to settle at 89.42 per pound from 89.98 and bounced back against the Japanese yen to finish at 61.50 per 100 yens from 61.63 on Thursday.

The local currency maintained its firm trend against the euro to close at 79.60 as compared to 79.80 earlier.

Elsewhere, the pound sterling is trading little changed on the downside against the US dollar after the Bank of England delivered dovish rate hike and the UK services PMI fell sharply to a three-month low in July.

The common currency euro bounced back from its early 5-week low to trade marginally weak against the greenback after eurozone services and composite PMIs both fell below expectations in July generating little market stimulus amid renewed global trade war jitters.

In forward market today, premium for dollar showed lacklustre trading activity due to lack of market moving factors.

The benchmark six-month forward premium payable in December eased to 120-122 paise from 120.75-122.75 paise and the far-forward June 2019 contract softened to 268-270 paise from 268.50-270.50 paise on Thursday.

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