Indian Rupee: Rebounds In Early Trades

The Indian rupee rebounded against the dollar in opening trades on Thursday, 24 May 2018 from a near 18 month low, on fresh selling of the US currency by exporters and banks. The minutes from the US Federal Reserves meeting yesterday appeared to have reassured investors that the central bank will not be too aggressive with raising interest rates. Besides selling of the American currency by exporters and banks, slight weakness in the dollar against some other currencies overseas propped the rupee. Further, a higher opening in the domestic equity market too influenced the rupee uptrend.

The domestic currency recovered from a near 18-month low by rising 12 paise to 68.30 against the dollar in opening trade today at the forex market. The rupee inched up to a high of 68.29 and was last seen trading at 68.3150 in the spot currency market. Yesterday, the rupee had lost 38 paise to hit a near 18-month low of 68.42 against the US dollar following relentless capital outflows amid concerns over macro conditions and surging crude oil prices.

Domestic benchmark indices were trading higher in early trade on bargain hunting following a steep sell off in the previous session. At 9:20 IST, the barometer index, the S&P BSE Sensex, was up 89.82 points or 0.26% at 34,434.73. The Nifty 50 index was up 33 points or 0.32% at 10,463.35. Overseas, most Asian shares declined as the trade dispute between the US and China remained in focus. US stocks closed higher Wednesday, after the minutes from the Federal Reserves 2 May 2018 meeting appeared to have reassured investors that the central bank will not be too aggressive with raising interest rates. Stocks were under pressure earlier as geopolitical and trade concerns continued to dent investor sentiment.

Although the greenback gained against most currencies on Wednesday as downbeat EZ PMIs and weak UK inflation data pressured the euro and sterling lower to fresh multi-month lows in Europe, dollar later retreated as release of mildly dovish FOMC minutes triggered broad-based profit taking in recent long dollar positions. According to the minutes of the most recent meeting, the Federal Reserve continues to project two more rate hikes are on the way this year with three more on the way for 2019. There was no interest rate hike at the May meeting, but policy makers debated the threat of inflation and acknowledged trade-related uncertainties.