Extending its winning run for the fifth straight session, the rupee on Tuesday rose by 8 paise to hit one-month high of 67.87 against the US currency on sustained selling of the dollar by exporters and banks ahead of the Union Budget to be presented tomorrow.
Expectations of an economically balanced Budget by sticking to its fiscal consolidation path which will give room for RBI to cut key rates along with robust capital inflows predominantly weighed on the local unit, despite a massive sell-off in equities.
Extreme dollar volatility in the midst of new US President Donald Trump’s protectionist policies also supported the trading sentiment.
Though, the Economic Survey today projected a lower economic growth of 6.5 per cent for this fiscal, impacted by demonetisation shock, but said it will rebound to 6.75-7.5 per cent in the next financial year.
Domestic markets remained in tentative mood and took a steep plunge as investors turned cautious ahead of tomorrow’s Budget announcements.
The local unit resumed sharply higher at 67.84 from overnight close of 67.95 at the Interbank Foreign Exchange (forex) market and largely traded in a narrow range.
It gained further ground in late Budget News afternoon deals to hit an intra-day high of 67.79 before finishing at 67.87, showing a gain of 8 paise, or 0.12 per cent – a level not seen since December 26, 2016.
Meanwhile, foreign funds remained net buyers and bought shares worth a net Rs 607.36 crore on Monday.
In worldwide trade, the dollar remained weaker against a basket of the other major currencies on growing concerns over the destabilising impact of Trump’s immigration policy continued to generate risk aversion.
The US dollar index was trading sharply lower at 99.94 in the late afternoon session.
The RBI fixed the reference rate for the dollar at 67.8125 and for the euro at 72.5526.
In cross-currency trade, the Indian unit also rallied against the British pound to conclude at 84.36 from 85.11 per pound.
But, it fell back against the euro to finish at 72.67 from 72.56 and also drifted against the Japanese Yen to close at 59.60 per 100 yens from 59.22 earlier.