India's current account deficit narrowed sharply to just $300 million
The rupee, on Thursday, soared by 36 paise, its biggest single-day gain in four months, to close at two-week high 66.66 a dollar on easing worries of foreign fund outflows.
Investors and currency traders rejoiced as sentiment turned highly buoyant after the US Federal Reserve expectedly left the policy rate unchanged. The country's current account deficit (CAD) narrowing sharply also boosted the sentiment.
The rupee spurted by a whopping 36 paise, or 0.54 per cent - its best one-day gain since May 25 -- to settle at 66.66 a dollar.
The local currency resumed on a firm footing at 66.86 as compared to previous close of 67.02 at the Interbank Foreign Exchange (forex) market. It soared to intra-day high of 66.65 before concluding at 66.66.
The country's current account deficit (CAD) narrowed sharply to just $300 million, or 0.1 per cent of GDP, in the June quarter, driven by lower trade deficit on deeper import contraction. A lower CAD provides stability to rupee.
The greenback lost further ground against major six currencies after the Federal Reserve held interest rate steady at 0.50 per cent, despite signaling that a rate hike is likely by December. The dollar index was down 0.16 per cent at 95.82.
Emerging market currencies also rallied against the US dollar after the Fed decision.
Bank of Japan (BoJ) on Wednesday kept interest rates on hold at minus 0.1 per cent in an overhaul of its massive stimulus programme.
Meanwhile, RBI fixed the reference rate for the dollar at 66.8451 and euro at 75.0203.
In cross-currency trades, the rupee retreated sharply against the pound sterling to close at 87.07 from 86.79 and fell back against the euro and settled at 74.89 as compared to 74.67 in Wednesday.
It remained under pressure against the Japanese yen and ended at 66.22 from 66.12 per 100 yens earlier.
In the forward market, premium for dollar continued to drift owing to consistent receiving by exporters.
The benchmark six-month premium for February dropped to 163-165 paise from 169-171 paise and the forward August 2017 contract also fell sharply to 345-347 paise as against 352.75-353.75 paise.
Meanwhile, foreign funds remained net buyers for the second straight session and bought shares worth Rs 183.85 crore, on Thursday, as per provisional data from stock exchanges.
The domestic market rallied in line with global peers with the BSE Sensex rising by 265.71 points to end at 28,773.13, while broader Nifty jumping over 90 points to 8,867.45.
Crude oil prices surged for the second day on weaker dollar and a large drop in US crude inventories.
Photograph: Danish Siddiqui/Reuters
