Indian rupee posts biggest single-day gain in 5 months

Mumbai - It closed at a one-week high.

The Indian rupee on Tuesday spurted by 54 paise, its biggest single-day gain in more than five months, to close at a one-week high of 71.48 against the US dollar (19.47 against the dirham), boosted by positive sentiment over the fiscal situation.
The Reserve Bank's decision to transfer a record Rs1.76 trillion dividend and surplus reserves to the government revived the rupee, forex traders said.
The US currency losing strength against major global rivals also boosted the rupee sentiment. The US dollar index, which measures its strength against six global peers, dropped 0.18 per cent to 97.90 on expectations that the US-China trade talks will resume soon.
Chinese currency yuan, however, fell further to more than 11-year low against the dollar.
"The Indian rupee gained probably on the back of stable fiscal situation," Sunil Sharma, chief investment officer, Sanctum Wealth Management, said.
At the interbank foreign exchange market, the rupee opened higher at 71.70 a dollar (19.53 against the dirham). It gained further to touch the day's high of 71.45 (19.46 against the dirham). The local unit finally settled at 71.48 (19.47 against the dirham), up by 54 paise - the biggest single-day gain since March 18, 2019.
The rupee had declined by 36 paise to more than nine-month low of 72.02 (19.62 against the dirham) on Monday.
The receipts from the RBI will give a fillip to the government's efforts to boost the economy from a five-year low as well as meet the fiscal deficit target.
Cautious optimism over US-China trade talks after US President Trump said his trade negotiators had received two "very good calls" from Beijing also influenced the local currency, dealers said.
Sensex rises
Easing US-China trade tensions and the RBI's decision to transfer Rs1.76 trillion of surplus funds to the government aided the Indian equity indices to close higher on Tuesday.
The Reserve Bank of India decided it will transfer the funds as recommended by the Bimal Jalan committee on the Economic Capital Framework (ECF).
"Easing fiscal deficit worries after the RBI decided to transfer Rs1.76 trillion to government helped sentiments," Deepak Jasani of HDFC Securities said.
The Sensex closed at 37,641.27, higher by 147.15 points, or 0.39 per cent, while the Nifty settled at 47.50 points, or 0.43 per cent, higher at 11,105.35.
Asian stocks also rose in step with their global peers on Tuesday while safe-haven bonds retreated, after US President Donald Trump softened his tone against China and predicted the two countries would be able to reach a trade deal.
"Buying continued as hopes of economic recovery in H2FY20 picked up after the government's proactive measures and additional liquidity from RBI which will clear the near term hindrance in the market," said Vinod Nair, Head of Research, Geojit Financial Services.
He added that any further shortfall in tax collection may influence the government to channelise the surplus fund on meeting the fiscal target.
Further momentum, experts said, will be tested based on the outcome of first quarter of fiscal year 2019-20 GDP during the week whereas the consensus is showing reduction in growth to 5.7 per cent due to weak investment and slowing consumption.