The Indian rupee extended its rally against the dollar on Thursday and gained 14 paise to a 21-month high of 63.98 at the Interbank Foreign Exchange. Analysts say that some disappointment on Donald Trump’s tax plan prompted a fall in US dollar against other global currencies. Meanwhile, sustained selling of the greenback by exporters and banks also supported the Indian currency. However, weakness in the equity markets capped gains in the rupee.
The rupee has rallied over 6 per cent against the dollar in this year so far as foreign investors poured over $12 billion into Indian shares and bonds amid improved appetite for Indian assets after the thumping win of BJP in Uttar Pradesh election boosted expectations of more economic reforms. Overseas holding of rupee-denominated government and corporate bonds jumped by $5.6 billion between January to March this year according to data from the National Securities Depository.
Yesterday, in line with a spectacular rally in equities, the rupee had surged by 15 paise to close at 64.12. This was the highest closing for the rupee since August 2015.
However, analysts believe that further gain in rupee is likely to be muted as foreign flows are slowing down and possible intervention by the Reserve Bank. Foreign funds are net sellers of $158 million worth of shares in April so far.
As of 10.55 am, rupee was trading 2 paise higher against the US dollar at 64.10 compared to Wednesday’s close of 64.12.