Indian rupee gains ahead of budget
Along with the rupee rally, India's benchmark indices closed higher for the first time this week.
Ahead of the widely anticipated Indian budget, the Indian rupee, one of the worst-performing Asian currencies in 2019, appreciated by seven paise on Wednesday to settle at 71.24 against the US dollar following gains in the domestic equity market.
Forex traders said that the rupee consolidated in a narrow range as market participants are assessing the economic implications of the coronavirus outbreak and awaiting cues from the Indian budget to be presented on February 1. Analysts said that although the significance of the budget on the market may have reduced during the decade, this time the importance is substantial due to very high expectations.
"The budget will be a blockbuster even if a decent part of wish-list is fulfilled, the event-risk is high this time," said Vinod Nair, head of Research, Geojit Financial Services.
Along with the rupee rally, India's benchmark indices closed higher for the first time this week on Wednesday as investors snapped up recently beaten down banking, finance and consumer stocks amid signs of recovery in global market sentiment. The 30-share BSE Sensex rallied 231.80 points, or 0.57 per cent, to finish at 41,198.66. Likewise, the broader NSE Nifty closed 73.70 points, or 0.61 per cent, higher at 12,129.50.
At the interbank foreign exchange market, the rupee opened at 71.23. During the day, the rupee saw a high of 71.17 and a low of 71.29. The currency finally settled at 71.24, up seven paise from its previous close. The rupee had settled at 71.31 against the American currency on Tuesday.
"Indian rupee gained as risk sentiment recovered amid a rebound in the global and domestic equities. Market players assessing the economic implications of the coronavirus outbreak," said V K Sharma, head PCG and Capital Markets Strategy, HDFC Securities.
Sharma said that strong foreign fund flows also supported strength in rupee as they have bought $2.21 billion equities so far this month.
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