The rupee gained sharply on Friday, reversing losses in the previous session as the dollar lost its luster after US inflation data raised hopes that the Federal Reserve would abandon its ultra-aggressive tightening policy.
Bloomberg quoted the rupee at 80.8625 per dollar after opening at 80.6888, compared to the previous closing price of 81.8112.
The domestic currency traded in the range of 80.5863 to 80.9888, below 81 per dollar. The last time the currency traded in the 80-per-dollar handle was seven weeks ago.
That sharp drop was caused by the slowing of US inflation news and the easing of the COVID-19 containment in China.
Positive domestic stocks and continued foreign capital inflows helped the rupee further, according to forex traders.
After an overnight sell-off triggered by lower-than-expected US inflation data that gave the market hope of a consumer price spike that could dampen the Fed’s aggressive monetary tightening, the dollar remained weak on Friday.
The yuan jumped after Chinese health officials relaxed parts of the country’s strict COVID-19 restrictions, including lowering quarantine periods for those in close contact with cases and visitors.
Following the news, the onshore yuan rose more than 1 percent, while the offshore yuan peaked at $7.0592 per dollar, its highest level in more than a month.
“It’s been talked about, but the fact that they’ve done it is a step in the right direction in refining the zero-COVID policy,” Moh Siong Sim, currency strategist at Bank of Singapore, told Reuters. .
The China COVID news further boosted risk sentiment, and the dollar’s weak attempt to recoup some of its significant overnight losses earlier in the day was largely halted.
The euro rose 2 percent overnight, reaching $1.0234, its best level since August, and moving further above parity with the greenback.
“Maybe this is the perfect storm of good news,” added Moh Siong Sim.
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