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Rupee has rallied 1.6% in the last three sessions, breaching the 73 per dollar mark, settling at its highest level since June 11 on Tuesday. The Indian rupee’s big gains over the last three trading sessions is making traders speculate that the Reserve Bank of India (RBI) may have loosened its grip over the domestic currency.
On Wednesday, the rupee opened flat and slipped to 73.10 against the US dollar. However, strong macroeconomic data and a rally in the domestic equity market restricted the rupee’s fall, forex dealers said.
“Data showed the Indian economy expanded at a record 20.1% YoY in Q2 2021, slightly higher than market forecasts of 20% while India’s infrastructure output growth stood at 9.4 % YoY despite the second wave of covid-19 infections and localized lockdowns supporting rupee,” CR Forex Advisors said.
The exchange rate had been moving within a range of 74-75 per dollar in the past two months. The unit rose 1.9% in August, its biggest gain since May and tracked Asian and EM currencies this month. The rise in currency levels is spurring talks that the RBI may be backing off as a glut of rupee liquidity that results from these operations could fuel inflation.
RBI Governor Shaktikanta Das on Tuesday said that the central bank plans to conduct more operations to manage any unanticipated surge in banking-system cash due to inflows.
Still, traders are reluctant to boost bullish bets on the rupee as previous such episodes have been short-lived, with the RBI quickly returning to hoover up dollars.
Globally, the dollar index remains steady around 92.75 levels with market participants eyeing the key focus on Friday’s US jobs report for clues on when the Fed could consider starting taper.
(With inputs from Reuters)
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