Rupee closes higher at 62.52 against dollar - Livemint

Intra-day, the rupee strengthened 0.53% to 62.36, its sharpest gain since 9 January, after the US Federal Reserve signalled that it will not raise interest rates any time soon. Photo: Mint

Mumbai: The Indian rupee on Thursday closely followed the equity markets trend and erased most of the morning gains as the local stock market fell from its day’s high.

Earlier in the day, the local unit opened at 62.39 per dollar and strengthened 0.53% to 62.36, its sharpest gain since 9 January, after the US Federal Reserve signalled that it will not raise interest rates any time soon.

The home currency closed at 62.52, up 0.28% from the previous close of 62.69.

The benchmark Sensex fell 0.53%, or 152.45 points, to 28,469.67. In the morning trade, Sensex rose as much as 356.62 points, or 1.25%, to 28,978.74 points.

Overnight, the US Federal Reserve changed its stance and opened the door for a rate hike perhaps as early as June, even though analysts remained divided on the timing of the first rate hike.

“The Committee judges that an increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labour market and is reasonably confident that inflation will move back to its 2% objective over the medium term,” said the Fed in its statement. It added that the change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range.

The Fed, however, also reduced its median estimate for the federal funds rate (the Fed’s benchmark policy rate) by the end of 2015, which led analysts to suggest that it will not rush through rate hikes.

“Just because we removed the word patient from the statement doesn’t mean we are going to be impatient,” chair Janet Yellen said in a press conference following the Fed meeting.

Currency dealers are not changing their rupee outlook and expect the local currency to trade within the same band that it was, before the Fed meeting.

“Yellen is dovish and even if she raises rate in June or September, the statements and interviews will be amply sugar-coated and dovish to avoid market collapse.

We believe new range for INR to be 62.0-64.0 for now,” said Samir Lodha, managing director at QuantArt Markets Solutions, a currency consultant.

Asian currencies closed mixed. The South Korean won was up 1.12%, Indonesian rupiah 0.93%, Chinese renminbi 0.54%, Taiwan dollar 0.47%, while Chinese offshore spot rose 0.16%. However, Singapore dollar was down 0.53%, Japanese Yen 0.47%, while Thai Baht shed 0.16%.

The yield on India’s 10-year benchmark bond closed at 7.756% compared with its Wednesday’s close of 7.793%. Bond yields and prices move in opposite directions.

Since the beginning of this year, the rupee has gained 0.84%, while foreign institutional investors have bought $5.31 billion from local equity and $6.4 billion from bond markets.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 98.747, up 0.21% from the previous close of 98.55.

Anup Roy contributed to the story.