Rupee posts best weekly gain against US dollar since September 2013

Mumbai: The Indian rupee appreciated by 2.30%, its biggest weekly gain since September 2013, as the emerging optimism on emerging market economies rubbed off on the domestic currency, and hopes that foreign investors would return to buy Indian shares and bonds comforted by fiscal prudence of the government spurred dollar sales by banks.

The rupee closed at 67.10—a level last seen on 13 January, up 0.36% from its previous close of 67.34. Intraday, the rupee touched a high of 67.08 per dollar.

Most Asian currencies and stocks gained on Friday and have appreciated this week on hopes that Chinese authorities will root for a stable yuan and rising commodity prices may lure foreign investors to riskier emerging market again.

South Korean won was up 0.95%, Indonesian rupiah gained 0.76%, Malaysian ringgit rose 0.54%, Taiwan dollar gained 0.32%, China renminbi 0.31%, Philippines peso 0.28%, China offshore 0.16%, and the Thai baht rose 0.08%.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 97.541, down 0.05% from its previous close of 97.592.

India’s benchmark Sensex index rose 0.16%, or 39.49 points, to close at 24,646.48. The index has gained over 1,600 points during the last four trading sessions.

The rupee is the second best performing currency among Asian units this week. The currency’s gains outstripped many of its Asian peers because of the government’s reiteration that it would stick to its fiscal consolidation path. In the Union budget on 29 February, the government kept the fiscal deficit target for 2016-17 at 3.5% of gross domestic product amid concerns of a higher deficit number.

Expectations are that the fiscal deficit number would give the Reserve Bank of India (RBI) comfort to cut policy rates in April. On 1 March, RBI deputy governor S.S. Mundra said that the budget was well balanced and pragmatic, further stoking expectations of a rate cut.

However, traders are cautious ahead of the release of US non-farm payrolls data. The report on US non-farm payrolls will give investors further insight into the health of the world’s biggest economy and the likelihood of further interest rate hikes by the US Federal Reserve, while China will announce its 2016 growth forecast when the National People’s Congress gets under way on Saturday, Bloomberg reported.

Meanwhile, India’s 10-year bond yield closed at 7.641%, as compared with Thursday’s close of 7.662%.

Since the beginning of this year, the rupee has lost 1.42% on the back of outflows as foreign institutional investors have sold $2.18 billion worth of domestic shares and $1.10 billion of bonds during the same period.