Rupee climbs to 3-week high of 66.42 after historic Fed move

Mumbai: The rupee surged to a three-week high of 66.42 against the American currency after the Federal Reserve's historic episode of monetary tightening measures triggered panic dollar selling.

A spectacular rally in domestic equities further supported the sentiment.

World financials and currency markets too reacted vehemently to the landmark outcome, ending months of lingering confusion and uncertainty.

The US Federal Reserve announced a quarter-point increase in the target range for the federal funds rate to 0.25-0.5 percent.

This marks the end to the seven-year regime of near-zero interest rates and the Federal Reserve's first interest rate hike in nearly a decade aftermath of global financial meltdown in 2008 - the worst economic disaster following Lehman's
bankruptcy.

The domestic unit opened firmly higher at 66.62 from Wednesday's close of 66.73 at the Interbank Foreign Exchange Market against the backdrop of overnight developments and continued its strong upmove till the final trade to end with a solid gain of 31 paise, or 0.46 percent at 66.42 - the level not seen since November 24.

It briefly touched an intra-day low of 66.6750. Frantic dollar selling by banks and corporates alongside unwinded long dollar positions by speculators helped the rupee to rally.

Robust stockpile of forex reserves and improving macro-economic environment alongside policy reforms by the Narendra Modi government and measures taken by governor Raghuram Rajan largely helped the Indian currency to withstand the volatility and pressure, a forex dealer said.

"The re-rating of India story and growing confidence in growth outlook, which stands the best with a 7.4 percent growth, also bolstered sentiment, he added.

Incredibly long string of reasons including concerns over the strength of the global economy, worries about slowdown in
the world's second-largest economy China and capital flight from emerging markets had prompted Fed to hold rates steady in
recent past, despite bullish macro cues.

On the global front, the dollar traded two-week highs against a basket of its major peers.

The stock market flagship index Sensex shot up by 309 points to end at 25,803.78, while broader Nifty jumped by 93 points to finish at 7,844.35.

Meanwhile, foreign investors once again turned net sellers and sold shares worth Rs 503.22 crore yesterday, as per provisional data.

In forward market today, premium for dollar fell sharply due to sustained receivings from exporters.

The benchmark six-month premium payable in May dropped to 188-189 paise from 192-194 paise and far forward November 2016 contract also slipped to 397.50-398.50 paise compared to 402-404 paise.

The RBI fixed the reference rate for the dollar at 66.6488 and for the euro at 72.3273.

In cross-currency trades, the rupee rallied against the pound sterling to end at 99.6133 from overnight close of 100.21 and rose against the euro to finish at 72.05 from 72.87 earlier.

It also firmed up against the Japanese currency to settle at 54.25 from previous close of 54.70 per 100 yen.