Mumbai: The Indian rupee on Tuesday hit an 11-month high against the US dollar as local equity markets surged over 440 points after Bharatiya Janata Party’s (BJP) landslide victory in Uttar Pradesh.
The rupee opened at 66.21 a dollar and touched a high of 66.18, a level last seen on 20 April 2016. At 9.15am, the home currency was trading at 66.19, up 0.63% from its previous close of 66.61.
“The Reserve Bank of India likely to intervene in the markets via state run banks to buy dollars to curb gains in the rupee,” said an analyst with a domestic brokerage, who did not wish to be named.
On Saturday, the BJP won an unexpected 312 out of 403 seats in the assembly elections of India’s largest state, raising expectations of continued political stability, smooth implementation of a proposed goods and services tax and reforms in areas such as labour laws and land acquisition.
The benchmark Sensex index rose 1.52% or 440.48 points to 29,386.71. So far this year, it has risen 11%.
The 10-year bond yield was trading at 6.889% compared to its Friday’s close of 6.904%. Bond yields and prices move in opposite directions. Markets were closed on Monday on the occasion of Holi.
The government will issue the consumer price inflation (CPI) data and wholesale price inflation (WPI) data for February due later on Tuesday. According to Bloomberg analyst polls, CPI will be at 3.6% for February versus 3.17% a month ago. WPI will be at 6.1% for February from 5.25% in January.
So far this year, the rupee has gained 2.5%, while foreign institutional investors (FIIs) have bought $2.85 billion and $576.70 million from local equity and debt markets, respectively.
Asian currencies were trading marginally lower. The Federal Open Market Committee is set to raise rates at the conclusion of its two-day meeting on Wednesday. Traders are also looking for clues on how quickly the US central bank is planning to tighten monetary policy.
South Korean won was down 0.29%, China offshore 0.11%, Philippines peso 0.06% and Singapore dollar 0.05%. However, Japanese yen was up 0.05%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 101.39, up 0.07% from its Monday’s close of 101.31.
On Friday, better-than-expected US job data provided further evidence for the Federal Reserve that the moment to raise interest rates has come. The Labor Department reported a gain of 235,000 jobs and healthy wage growth in a month when even the weather cooperated, Reuters reported.
