The rupee strengthened by 10 paise to hit a two-month high level of 83.66 against the US dollar on Thursday after the US Federal Reserve cut the benchmark interest rate by 0.50 per cent, boosting investors’ sentiment.
Forex traders said massive buying in domestic equities and inflow of foreign funds also supported the local unit.
At the same time, some initial gains in the American currency post the Fed’s announcement failed to resist recessionary fears in the world’s largest economy.
Moreover, an upward movement in crude oil prices, capped the rise in the local unit, they added.
At the interbank foreign exchange market, the Indian currency opened at 83.70 and touched an intra-day high of 83.56 against the greenback. During the session, it touched the lowest level of 83.73 against the dollar.
The unit finally settled at 83.66 (provisional) against the American currency, registering a gain of 10 paise from its previous closing.
The currency had earlier recorded the same closing level on July 22 this year.
On Tuesday, the local unit had gained 10 paise to settle at 83.76 against the US dollar.
The forex market was closed on Wednesday due to a holiday declared by the Maharashtra government.
Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, said the rupee gained on Thursday and traded at a two-month high as domestic equities touched fresh all-time highs after a 50 basis points rate cut announced by the US Federal Reserve.
The rupee is expected to trade with a slight positive bias on firm tone in the domestic markets and rising expectations that an aggressive 50-bps rate cut by the Fed may attract fresh FII inflows.
“Overall weakness in the US dollar may also support the rupee. However, a positive tone in crude oil prices may cap a sharp upside, he said, adding, “USD-INR spot price is expected to trade in a range of 83.40 to 83.80.”
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was down 0.01 per cent to 100.27.
Brent crude, the international benchmark, advanced 1.05 per cent to $74.42 per barrel in futures trade.
In the domestic equity market, the 30-share BSE Sensex climbed 236.57 points, or 0.29 per cent, to a fresh peak of 83,184.80, while the Nifty rose 38.25 points, or 0.15 per cent, to 25,415.80.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Wednesday, as they purchased shares worth ₹1,153.69 crore, according to exchange data.
The latest government data released on Wednesday showed net direct tax collection grew 16.12 per cent to over ₹9.95 lakh crore so far this fiscal on higher advance tax mop-up.
