Mumbai, November 11 The Indian rupee surged by 62 paise to close at 80.78 against the greenback on Friday on expectation the Federal Reserve may moderate the pace of its rate hikes after the US CPI inflation for October eased.
On Thursday, the local currency had closed at 81.40 against the dollar.
The US Consumer Price Index slowed to 7.7 per cent in October compared to 8.2 per cent in September.
“Investors now believe that the Fed might moderate the pace of rate hikes in the coming months as inflation seems to have peaked. As a result, US and European stock markets rose, dollar index fell, oil and gold prices gained,” a research report by Bank of Baroda said.
Anindya Banerjee, vice president, currency derivatives & interest rate derivatives, Kotak Securities Ltd said that lower than expected US inflation triggered a sharp rally in risk assets and fall in the dollar index. The dollar index, which is a measure of the value of the greenback against six major currencies – the Euro, UK Pound, Canadian Dollar, Japanese Yen, Swedish Kroner and Swiss Franc, fell to around 107.3.
“Over the next week, we could see further appreciation in rupee against USD. We expect a range of 80.00-81.10 on spot,” Banerjee said.
During the week, the local currency appreciated by more than 1% on the increased probability that the US Federal Reserve will hike the interest rates by 50 basis points in December against the previous expectation of 75 basis point hike, IFA Global said in a note.
Earlier this month, the Fed increased its interest rate by 75 basis points for the fourth time in a row to 3.75-4%.
Separately, the country’s foreign exchange fell by $ 1.08 billion to $529.994 billion in the week ended November 4.
In the previous week ended October 28, the reserves had surged by $6.56 billion, the biggest weekly gain in more than one year, to $531.08 billion.
Meanwhile, the benchmark indices Sensex and Nifty ended over one per cent today on strong global cues and weak dollar.
The 30-share BSE Sensex soared 1,181.34 points, or 1.95 per cent, to close at 61,795.04. The broader NSE Nifty also rose 321.5 points, or 1.78 per cent, to end at 18,349.7.
“Equity markets were strong across the world, developed and developing, were strong as the inflation data in the USA was better than expected. This essentially has reduced the recession probability from 60% to 40% and has brought down the expectation of a peak benchmark rate from 5.25% to 5%. This is the first spark of good news from the USA in a long time and has been instrumental in lifting investor sentiments,” said Sushant Bhansali, CEO, Ambit Asset Management.
Most Asian stock markets rallied on Friday after softer-than-expected US inflation data posited a slightly less hawkish outlook for interest rates, while China’s withdrawal of some COVID-related curbs drove outsized gains in local markets, said Deepak Jasani, head of retail research, HDFC Securities.
Foreign institutional investors (FIIs) net bought Rs 3,958.23 crore of shares from the domestic capital market on Friday, the BSE’s provisional data showed.