After falling for five straight sessions, the rupee today strengthened against the dollar, aided by the Reserve Bank of India (RBI)'s intervention, as well as a sovereign outlook revision by Fitch Ratings. In addition, the anticipation of government action tomorrow to boost inflows helped the currency gain. It had weakened 7.4 per cent since the beginning of May.
Yesterday, the rupee hit an all-time intra-day low of 58.99 against the US greenback, which triggered the central bank to ask public sector banks to sell dollars. According to dealers, today also, RBI intervened. In the late afternoon, rating agency Fitch revised its outlook for the economy to stable from negative.
"Globally, the weakness in the dollar and the strength in the euro lent a helping hand. In addition, the revised outlook by Fitch further contributed to the appreciation in the rupee during the closing hours. We feel the rupee is likely to continue with its correction till 57.50-57.25 levels," said Abhishek Goenka, founder and chief executive officer, India Forex Advisors.
Today the rupee closed at 57.79 a dollar, one per cent stronger than its previous close and two per cent higher than it's all-time low yesterday. "The unexpected shift in Fitch's stance towards India's sovereign outlook is a good news for the Indian rupee, which has been significantly weighed down by broad. The dollar strength, portfolio outflows and renewed current account deficit concerns in recent days," said Standard Chartered Bank in a note to its clients.
Economic affairs secretary Arvind Mayaram said in the morning that the rupee would correct itself, once the outflows stopped and termed the recent fall an "aberration".
"What we are seeing on the rupee today is primarily on account of global developments and not so much due to domestic issues. The currency will correct itself as soon as our fundamentals are very strong, and the economy is on the right track. We are seeing green shoots of growth and inflation is coming down," Mayaram said in his speech at an investors' summit.
The secretary said, a recovery in growth were already visible and "We will see a revival in investments in the next four to six months".
"If the macroeconomic parameters continue to improve, which we believe are improving, then it certainly would have a positive impact on the rupee. We are not saying the government will take any specific measures for the rupee, but we will continue to work towards strengthening the macroeconomic parameters, which in effect, has an overall growth impetus and also improves the value of the rupee," Mayaram said.
The currency is likely to gain tomorrow also as portfolio flows are expected in the stock market.
"The stock market did not get much time to react to the Fitch news. So, tomorrow, we will see a rally in the stock market due to which the rupee will strengthen further. I expect the rupee to trade in the range of 57.20 to 57.60 tomorrow," said a currency dealer with a private bank.