Rupee appreciation is likely to continue in the near term towards 73.70 level, says ICICIdirect.
Indian rupee erased early gains and ended lower at 74.32 per dollar, amid volatility seen in the domestic equity market.
It opened higher by 14 paise at 74.18 per dollar against previous close of 74.32 and traded in the range of 74.17-74.51.
At 14:14 IST, the Sensex was down 50.08 points or 0.13% at 38749.00, and the Nifty was down 25.10 points or 0.22% at 11441.40.
"A sharp appreciation of 0.75% has been witnessed in rupee amid the persistent portfolio inflows and as the domestic currency was eventually seen mirroring the decline being seen in the dollar index. The domestic currency had been trading in a range of 75.50-74.50 for quite some time, but has finally managed to breach the crucial hurdle of 74.50 mark to edge higher," said Sugandha Sachdeva VP-Metals, Energy & Currency Research, Religare Broking.
"In the current scenario, the unfettered money printing drive by the major central banks has fuelled the “risk on” trade in markets even as the Covid crisis rages on. Near term sentiments have turned positive amid upbeat equities and going forward, once 74 level on the rupee is breached, the currency looks primed to test levels of around 73.50 and can even extend its strength towards 72.80 in coming days. Markets would now be eyeing Fed’s guidance about the monetary policy framework at the Jackson Hole conference later in the week," she added.
The quantitative easing that the Fed has deployed so far has flooded financial markets with excess liquidity and weighed on the dollar. Rupee appreciation is likely to continue in the near term towards 73.70 level, said ICICIdirect.
The dollar-rupee August contract on the NSE was at 74.16 in the last session. The open interest in the August series declined 2.38% while it increased 19.29% in the next series, it added.