Indian rupee at 74.66 against dollar, reaches 20.34 vs Dirham

Forex traders said investors were bullish on emerging market assets

  
A trader wearing protective hand gloves counts Indian currency notes at a market during a 21-day nationwide lockdown to limit the spreading of coronavirus disease (COVID-19), in Kochi, India, March 27, 2020.

A trader wearing protective hand gloves counts Indian currency notes at a market during a 21-day nationwide lockdown to limit the spreading of coronavirus disease (COVID-19), in Kochi, India, March 27, 2020.

REUTERS/Sivaram V

UAE - The rupee appreciated 38 paise to settle at 74.66 against the US dollar, to quote at Dh20.34 on Friday tracking weakness in the greenback and gains in the domestic equity market amid optimism over potential COVID-19 vaccine.

Forex traders said investors were bullish on emerging market assets following encouraging vaccine test results. Moreover, positive domestic equities, steady crude oil prices and weak US currency supported the local unit.

The rupee opened at 74.60, and settled for the day at 74.66 against the US dollar, registering a jump of 38 paise over its previous close. It had settled at 75.04 against the greenback on Thursday. During the four-hour trading session, the rupee witnessed an intra-day high of 74.60 and a low of 75.02.

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.11 per cent to 97.20.

Abhishek Goenka, Founder and CEO, IFA Global, said: "Overall, there seems to be little disagreement among market participants about the direction in which the rupee is headed over the medium term given the expansionary monetary policy and fiscal policy."

The market participants are divided over the pace of rupee depreciation from here on. "We feel we are still not out of the woods with respect to the pandemic globally and emerging market currencies like Rupee may not find buyers at least in the short term. We feel another 2-3 per cent depreciation for the rupee may not be ruled out at least in the short to medium term post which we feel some buyers will find merit to earn carry by selling dollar against the rupee which is around 4 per cent for a year."

Goenka further added: "The rupee is likely to track the broader dollar and global risk sentiment and may under perform as the Corona cases' curve does not seem to be flattening. Communication to the markets that RBI may enter on both sides may smoothen volatility a bit. However, the risks of rising NPA's post moratorium and huge fiscal slippages, poor tax collections and trade tensions weigh on the rupee in medium term."

On the global front, in a fresh escalation, the US is ramping up it's aggressive rhetoric on China which could be an another blow to risk assets. "74.50 level on the down side is a crucial support for the USDINR pair. Up side momentum would gather steam on break above 76.50 again. Broad trend remains bullish for the pair," said Goenka. - With inputs from PTI

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