Rupee closes higher against US dollar for fifth session

Mumbai: Indian rupee on Friday strengthened for the fifth session, its longest winning streak since February, to hit near three-week high against the US dollar on steady inflation and better-than-expected factory output data.

The home currency ended at 64.92 against the dollar, up 0.26% from its Thursday’s close of 65.09. The rupee opened at 64.95 a dollar and touched a high of 64.87, a level last seen on 25 September.

The BSE benchmark index rose 0.78%, or 250.47 points, to closed at 32,432.69. So far this year, the Sensex has gained over 21%.

Consumer Price Index (CPI)-based inflation for September stood at 3.3% from its revised figure for August—the provisional retail inflation for August was 3.36%.

“Incoming trends suggest that the October reading might also be benign around 3.2-3.4% aided by softer food prices, favourable base effects, fuel excise cuts and easing impact of GST changes. These are likely to feed into rate cut expectations. Two factors will, however, stay the central bank’s hand—the likelihood that inflation will trend towards 4-4.2% by March 2018, albeit lower than the RBI’s own projections, and that core inflation is above the 4% CPI target and continues to outpace the headline. These factors reinforce our expectations that rates have plateaued for the year,” said Radhika Rao, chief economist of DBS Bank Ltd.

India’s factory output rebounded strongly to a nine-month high of 4.3% in August versus 0.9% in July and 4% a last year.

“It is premature to assume that this marks a turnaround for the industrial cycle, sequential trends are likely to improve in the months ahead, even if not to the extent of August’s outcome. Festive demand and better consumption on higher allowances will also be of help. At the same time, recent GST fine-tuning measures for exporters and smaller businesses should ease compliance costs, iron out the squeeze on working capital and lower the tax burden, helping economic activity. These factors and April-August trends put the FY18 annual growth at a likely 2-3%, slower than 4.6% last year,” Rao added.

The 10-year bond yield closed at 6.734% compared to its previous close of 6.741%. Bond yields and prices move in opposite directions.

So far this year, the rupee has gained 4.59%, while foreign institutional investors have bought $5.11 billion and $21.65 billion in equity and debt, respectively.

Asian currencies were trading higher. South Korean won was up 0.34%, Japanese yen 0.16%, Malaysian ringgit 0.15%, China offshore 0.11%, China renminbi 0.1%, Taiwan dollar 0.09% and Thai baht 0.08%. However, Singapore dollar was down 0.15% and Philippines peso 0.06%.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 92.97, down 0.10% from its previous close of 93.057.