Rupee rises 17 paise to 95.56 against US dollar in early trade

After the US Treasury unveiled that it would double its buyback operations for longer-dated Treasury bonds, MUMBAI: The rupee appreciated 17 paise to 95.56 against the American currency in early trade on Thursday tracking a subdued US dollar.

Key points

• While the Nifty was trading up 118.85 points to 24, 198.55 in early trade, on the domestic market front, Sensex jumped 504.32 points to 77, 416.16.
• At the interbank foreign exchange, the rupee opened at 95.57, then rose to 95.56, higher by 17 paise from its previous close.
• Brent crude, the global oil benchmark, was trading higher by 0.32 per cent at USD 91.91 per barrel in futures trade.
• According to Pabari, the immediate backing for the rupee is near 95.30-95.50.
• It gauges the greenback's strength against a basket of six currencies, was trading at 98.82, lower 0.01 per cent.

Forex traders remarked the dollar index fell to its lowest level since late May after the US Treasury unveiled that it would double its buyback operations for longer-dated Treasury bonds, pushing US long-term yields lower and reducing the dollar's yield advantage.

Moreover, the dollar is additionally being weighed down by reduced expectations of further Federal Reserve tightening though the FED policymakers' inflation worries rose at the July gathering, according to the FED minutes.

On Wednesday, the rupee stayed almost flat, ending just 1 paisa higher at 95.73 against the US dollar.

Meanwhile, the dollar index. It gauges the greenback's strength against a basket of six currencies, was trading at 98.82, lower 0.01 per cent.

According to The US Treasury has, it will at least double how much it buys back in longer-term administration bonds, from USD 2 billion to USD 4 billion per operation, starting September 9.

"Lower long-term yields and concerns around fiscal support can reduce the appeal of dollar assets, " CR Forex Advisors MD – Amit Pabari remarked.

"Oil continues to trade above USD 90 with a nervous edge, keeping pressure on India's import bill. So while a weaker dollar offers some relief to the rupee, elevated oil rates remain a major counterweight, " Pabari stated.

According to Pabari, the immediate backing for the rupee is near 95.30-95.50. As long as this holds, USD/INR is projected to gradually move towards 96.20-96.50, he stated.

"The weaker dollar may create short-term pauses, but oil and sentiment remain fragile. Dips are therefore probable to be shallow and short-lived rather than a genuine trend reversal, " he stated.

Foreign institutional investors purchased equities worth Rs 407.99 crore on a net basis on Wednesday, according to exchange data.

In short, rupee rises 17 paise to 95.56 against US dollar in early trade is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.