Rupee back to 78 levels vs dollar as FPIs return to Indian markets.

The rupee strengthened well below 79 against the dollar on Tuesday and closed at its strongest level in over a month. It settled at 78.71 per dollar, against the previous day’s close at 79.03. The US dollar index, a measure of the currency against six major rival pairs, was at 105.67 around 6.15 pm IST on Tuesday. It had climbed to a 20-year high of 108.54 in late July. “The Indian rupee outperforms Asian currencies as lower oil prices improve the outlook for the trade balance and foreign fund buying helps fill the gap in dollar demand and supply. The local currency has been one of the biggest beneficiaries of the recent slide in crude oil prices,” HDFC Securities Research Analyst Dilip Parmar told Business Standard. 

According to the US Federal Reserve's latest policy statement, the rupee has strengthened 1.4 per cent versus the US dollar, faring better than the Singapore dollar, the South Korean Won, the Indonesian rupiah, the Malaysian ringgit, the Chinese yuan, the Hong Kong dollar, the Philippine peso, the Taiwan dollar and the Turkish lira. 

The decline in crude oil prices, has reduced the risk for inflation in India, which has boosted sovereign bond prices with the yield on the 10-year benchmark paper settling at its lowest level in three months

“Foreign fund inflows, a decline in crude oil prices, and a weak US dollar have helped the rupee gain a healthy correction after losing one-sidedly over the past two months,” said CR Forex Advisors MD Amit Pabari.