A sharp fall in oil prices, easing concerns on the current account deficit front, and weakness in the dollar overseas boosted the rupee, say analysts.
The rupee jumped by 112 paise against the dollar on Tuesday, marking its strongest single-day gain against the greenback in more than five years. The rupee also logged its highest closing level since November 30.
Tuesday’s gain of 1.6 per cent helped the rupee register its best single-day jump since September 19, 2013, when it had surged by 161 paise against the dollar.
The rupee opened higher against the dollar at 71.34 on Tuesday, and finished at the day’s strongest point.
Lower crude prices and expectations of fewer US rate hikes in 2019, as the markets counted down to a crucial Federal Reserve meeting, supported the currency.
Domestic stock markets managed a higher closing for a sixth consecutive session despite lacklustre trade. The Sensex ended 77 points higher at 36,347 while the Nifty rose 20 points to settle at 10,908, marking the best closing for the 50-scrip index in 11 weeks.
The Federal Reserve – the US central bank – is due to announce its rate decision after the conclusion of the two-day meeting on Wednesday.
While the central bank is widely expected to raise rates this month, analysts are calling for two more hikes in 2019 compared with three in September on worries over a potential recession there.
“Falling crude oil prices eased twin deficit concerns which improved the overall risk sentiment,” said forex advisory firm IFA Global.
Crude oil prices hit 14-month lows on Tuesday, in anticipation of an oversupplied market ahead. North Sea Brent – an international benchmark for crude oil – fell as much as four per cent to hit a 14-month low of $57.20 a barrel.
Analysts say easing of crude oil prices augurs well for the rupee.
“The recent announcement to restrain crude output by 1.2 million barrels a day has not affected prices which is a positive for the currency,” said CARE Ratings, a credit ratings agency.
A drop in bond yields, easing liquidity concerns in the market and a bullish trend in equities trade, supported the rupee in maintaining its upward movement.