A man holds two thousand and five hundred Indian rupee banknotes for a photograph in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Rupee Revisits 1-Week High Ahead Of Key Macro Data

Rising for the second straight session, the rupee today strengthened by 8 paise to end at a fresh one-week high of 64.37 a dollar on sustained selling of the U.S. currency ahead of key macroeconomic data.

The domestic unit largely withstood intense pressure emanating from strong dollar overseas following robust weekend jobs data and fears of an imminent rise in US interest rates with the U.S. central bank's two-day monetary policy starting tomorrow.

The Federal Reserve is widely expected to hike key interest rates for the third time this year.

The local currency resumed on a firm footing at 64.35 from last weekend's close of 64.45 at the Interbank Foreign Exchange (forex) market on the back of dollar unwinding by exporters and some foreign banks.

It gained further ground to hit an intra-day high of 64.31 during the mid-afternoon deals following adequate dollar supplies also well supported by rallying equities. The home unit finally settled at 64.37, revealing a smart gain of 8 paise, or 12 percent.

The RBI, meanwhile, fixed the reference rate for the dollar at 64.3616 and for the euro at 75.8051.

Steady capital outflows also kept forex market sentiment little nervous.

Foreign investors have pulled out more than Rs 4,000 crore from the country’s stock markets this month so far, mainly due to rising crude prices and widening fiscal deficit.

Highly bullish local equities along side expectations of strong bounce in industrial production data predominantly supported the rupee momentum.

The industrial output data data and the retail inflation numbers will be released tomorrow.

Domestic equities extended their bullish run for the third consecutive day on across-the-board buying spree in key front-line counters even as investors turned more optimistic on BJP's win in the Gujarat assembly elections.

The BSE benchmark Sensex zoomed over 205 points to close at 33,455.79, while the Nifty jumped 57 points to 10,322.25.

On the global front, the dollar traded firm against its major counterparts supported by solid November U.S. labour market report. Moreover, the tone of November labour market report is set to provide basis for the Federal Reserve to hike rate this Wednesday by 25 basis points.

The dollar index, which measures the greenback's value against a basket of six major currencies, was up at 93.77 in early trade.

In cross-currency trades, the rupee rebounded against the pound sterling to end at 86.19 from 86.81 but fell back against the euro to finish at 75.92 from 75.64 earlier. It also drifted back against the Japanese yen to close at 56.78 per 100 yens as compared to 56.76 on last Friday.

Elsewhere, the pound sterling continued its heavy Brexit-related slump for the second-straight session against the US dollar after key EU officials expressed doubts over the ability of the U.K. to finish the trade negotiations before finally exiting EU on March 2019. On the other hand, the common currency euro traded little changed ahead of first-tier data later this week.

In forward market today, premium for dollar declined owing to sustained receiving from exporters.

The benchmark six-month premium payable in May eased to 128.50-130.50 paise from 131-133 paise and the far forward October 2018 contract also moved down to 265.50-267.50 paise from 268.50-270.50 paise.

On the international energy front, crude prices traded almost flat as rising U.S. output threatens to undermine efforts to support prices by withholding supplies.