Rupee appreciates 8 paise to 65.38 against US dollar in early trade
NEW DELHI: The rupee appreciated 8 paise to hit a fresh 16-month high of 65.38 a dollar level in early trade on Monday.
The domestic currency had a high of 65.41 last week after the Fed comments at the end of its two-day policy meeting looked less hawkish than expected. But on Friday it fell by 5 paise to settle at 65.46 against the greenback.
The domestic currency also gains strength after the market read the BJP’s good show in the recently-concluded state elections as a sign that the ruling government might come back to power in the 2019 general election.
Some experts, though, believe the RBI may intervene in the market should the rupee climb to the 65 level against the dollar.
In an interview to ET Now, Sanjay Shah, Head of Fixed Income at HSBC Global Asset Management, said the positive that has come about in the rupee has been due to the election outcome.
“Equity flows into India have jumped and people buying more and more of equities. That flow itself has taken the rupee to the prevailing level. The election results were overwhelmingly positive and that actually gave a boost to the rupee. Dollar too has weakened after the Fed announcement, as the US central bank did not go more hawkish than what it already was.”
He said if the rupee hits 65 level, RBI may not be too comfortable because the movement has happened in a very short span of time.
“So it would want to control that volatility. We are already flushed with about 5 lakh crore additional deposit. So it creates an additional problem for the RBI to handle additional liquidity that is coming in the system. So those are issues around the rupee appreciation,” Shah said.
The domestic currency had a high of 65.41 last week after the Fed comments at the end of its two-day policy meeting looked less hawkish than expected. But on Friday it fell by 5 paise to settle at 65.46 against the greenback.
The domestic currency also gains strength after the market read the BJP’s good show in the recently-concluded state elections as a sign that the ruling government might come back to power in the 2019 general election.
Some experts, though, believe the RBI may intervene in the market should the rupee climb to the 65 level against the dollar.
In an interview to ET Now, Sanjay Shah, Head of Fixed Income at HSBC Global Asset Management, said the positive that has come about in the rupee has been due to the election outcome.
“Equity flows into India have jumped and people buying more and more of equities. That flow itself has taken the rupee to the prevailing level. The election results were overwhelmingly positive and that actually gave a boost to the rupee. Dollar too has weakened after the Fed announcement, as the US central bank did not go more hawkish than what it already was.”
He said if the rupee hits 65 level, RBI may not be too comfortable because the movement has happened in a very short span of time.
“So it would want to control that volatility. We are already flushed with about 5 lakh crore additional deposit. So it creates an additional problem for the RBI to handle additional liquidity that is coming in the system. So those are issues around the rupee appreciation,” Shah said.
