Rupee rebounds to 60.19 on lower current account gap

A sharp moderation in CAD and strong equities helped rupee rebound by 53 paise, its best single-day gain in a fortnight, to end at 60.19 against dollar.

Fresh dollar selling by exporters on hopes of fall in the USD after downward revision to that country's first quarter GDP growth also helped rupee recover as hopes surfaced that the Fed may delay the plan to taper of monetary stimulus.

At the Interbank Foreign Exchange (forex) market, the domestic unit resumed higher at 60.45 a dollar from previous all-time closing low of 60.72.

Later, it touched a low of 60.63 but with March quarter Current Account Deficit (CAD) coming at 3.6 per cent against expectations of 4.4 per cent, the rupee rallied. It rebounded to a high of 60.10, before concluding at 60.19, rise of 53 paise or 0.87 per cent -- its best rise since June 12 (60 p).

On Wednesday, it had plunged by a whopping 106 paise or 1.78 per cent as month-end dollar demand demand surged.

"Release of the balance of payments data two days ahead of schedule suggests that the RBI is trying to calm markets following USD/INR breaching 60 yesterday evening," said Sonal Varma, India economist, Nomura. CAD moderated sharply to 3.6 per cent for March quarter from 6.7 per cent in the previous quarter, but overall CAD for FY'13 stood at at 4.8 per cent, versus 4.2 per cent in FY12.

There was no sign of support on capital inflows front as FIIs pulled out over Rs 1,000 crore from stocks (cash) today.

...

Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said that rupee bounced back from yesterday' fall and managed to trade strong against dollar taking cues from local equity markets which closed up by over one & half per cent.

"Tomorrow India will come out with its Foreign Debt and Forex Reserve data which will clear the picture regarding CAD issue. Trading range for the spot Rupee is expected to be within 59.90- 60.60."

Dollar index was up by a mere 0.02 per cent against a basket of six global currencies ahead of release of US consumer spending and labour-market figures which could affect the Federal Reserve's policy outlook.

Rupee has so far depreciated nearly 12 per cent since May, hit hard by outflows. Today's recovery notwithstanding, experts are still not ruling out rupee from testing new lows.

"The rupee's gains were on the back of lower-than- expected CAD figure for the March quarter released today. Strong positive closing in the stock markets also lent a helping hand to the sinking rupee. This week's closing will be very important to have an idea of the future trend," said Abhishek Goenka, Founder and CEO, India Forex Advisors.

...

CRISIL Research however, believes that the current flight of capital and sharp plunge in rupee is a short term phenomenon and largely in response to the uncertainty around the impact of the Federal Reserve's pullback of quantitative easing.

"Moreover, the government is pledging a slew of domestic policy reforms to shore up domestic and foreign investor sentiments. This, if successfully done, can act as a pull factor for foreign capital inflows," it said.

Meanwhile, premium for forward dollar ended weak on receipts by exporters.

Benchmark six-month forward dollar premium payable in November dropped to 147-149 paise from Wednesday's close of 153-155 paise. Far-forward contracts maturing in May also dipped to 318-320 paise from 326-328 paise.

RBI fixed the reference rate for the US dollar at 60.5880 and for the euro at 78.9412.

Rupee recovered sharply against the pound sterling to 92.05 from last close of 93.21 and also rebounded against the euro to 78.48 from 79.05.

It also recouped against the Japanese yen to 61.37 per 100 yen from previus close of 62.09.