A narrowing in December’s trade gap also helped the rupee, traders said.
The rupee opened at 86.50/$1 on Wednesday, stronger than the previous day’s close of 86.63/$. The rupee gained on Wednesday, a day after falling to an all-time low of Rs 86.65/$1LSEG shows the data.
The dollar index – a gauge of the US currency against six major global units – was at 109.22. Despite Wednesday’s rebound, the rupee has fallen 3% since Donald Trump was declared the winner of the US presidential election on November 4.
Intervention by the Reserve Bank of India (RBI) helped strengthen the rupee, although the central bank did not absorb the dollar to limit its appreciation, traders said. Traders also mentioned that the RBI had undertaken another round of buy-sell swaps worth $2-3 billion to ease domestic liquidity.
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Such an exchange was also conducted on Friday.
Ritesh Bhansali, vice-president, Maclai Financial Services, said, “Such corrections are expected from time to time in a volatile market. Importers are buying on every dip (rupee strength) and at least hedging their near-term positions.” .
India’s trade deficit narrowed to $21.94 billion in December, compared to $32.84 billion in November, driven by higher exports and lower imports.
Traders are now looking ahead to US CPI data expected on Wednesday after market hours. “If the CPI data is unexpectedly low, it could reassure market participants that the US is still on track for a rate cut,” said a trader with a private bank.
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