Weekly Review: Rupee stages smart recovery to end at fresh 2-week high

Reversing its short-term downtrend, the rupee staged a smart recovery to end at a fresh two-week high of 64.04, appreciating 11 paise against the American currency on bouts of dollar selling by exporters and corporates.

This is the best closing for the home currency since August 9, when it had settled at 63.84.

Though, the overall forex market sentiment was largely perturbed by the global central bankers' upcoming meet at Jackson Hole and lack of fresher macroeconomic clues amid wavering global mood due to political volatility in the US.

Consistent selling of dollars by some foreing banks and unwinding of short-term forward contracts by exporters mainly boosted the sentiment for the local unit.

However, heavy capital outflows from the country against the backdrop of buoyant dollar overseas capped the rupee rise to some extent, a currency trader said.

Foreign portfolio investors (FPIs) and funds pulled out USD 535.66 million from Indian markets during the week.

Meanwhile, the US dollar succumbed to heavy selling due to lack of monetary policy guidenece and specifically pertaining to the Fed's outlook on the US economy after Yellen's Jackson Hole outcome let down market sentiment.

Heightened geopolitical tensions across the region amid weak macro economic data releases in the past two weeks largely kept the home currency under immense pressure.

In the meantime, the foreign exchange reserves declined marginally after touching a record high, by USD 211.1 million, to USD 393.401 billion in the week to August 18 due to fall in foreign currency assets, the RBI data showed.

At the Interbank Foreign Exchange market (forex), the local unit resumed on a strong note at 64.07 as compared to 64.15 last weekend.

It gained further ground to hit a high of 64.01 following heavy dollar selling and also unwinding of short-term forward contracts by exporters before ending at 64.04, showing a gain of 11 paise, or 0.17 percent.

The rupee had depreciated by a whopping 57 paise in two straight weeks.

The RBI, meanwhile, fixed the reference rate for the dollar at 64.0676 and for the euro at 75.5805.

Forex market was shut on Friday in observance of Ganesh Chaturthi.

With PTI Inputs