BJP's Gujarat and Himachal elections victory lifts rupee to 3-month high, domestic currency closes at 64.04
BusinessToday.in December 19, 2017
A day after the Bharatiya Janata Party's (BJP) thumping victories in the states of Gujarat and Himachal Pradesh in the Assembly elections, spirited investors on Tuesday lifted rupee by 20 paise to close at the three-month high of 64.04 against the US dollar. Although rupee faced little friction on Monday and lost by 20 paise on the election result day only to close at 64.24, the domestic currency came out of its losses by the end of the day on Tuesday as the election results in Gujarat and Himachal Pradesh became evident. Other factors responsible for the recovery of rupee were heavy dollar unwinding, robust capital flow and domestic equity indices hitting fresh all-time highs. The BJP won 99 seats in the 182-member Assembly in Gujarat, and retained power for the sixth time, while Opposition Congress got 77 seats. In Himachal Pradesh, the saffron party won 44 seats while the ruling Congress could win 21 seats in the 68-member Assembly in the hill state.
The dollar held steady against other majors currencies in quiet trade as investors remained cautious regarding progress on the US tax reform front. At the Interbank Foreign Exchange (forex) market, the rupee opened a tad higher at 64.22 against Monday's close of 64.24 on fresh bouts of dollar selling. But later gaining strength, the home currency breached the 64-mark to hit an intra-day high of 63.94 in mid afternoon trade before concluding at 64.04, showing a smart gain of 20 paise, or 0.31 per cent. The RBI, meanwhile, fixed the reference rate for the dollar at 64.1205 and for the euro at 75.6365. The flagship Sensex shot up over 235 points to close at 33,836.74, while Nifty jumped nearly 75 points to 10,463.20. The dollar index, which measures the greenback's value against a basket of six major currencies, was up at 93.14 in early trade. In cross-currency trades, the rupee continued to rule firm against the pound sterling and ended at 85.70 from 85.81 per pound and hardened against the Japanese yen to settle at 56.87 per 100 yens from 57.07 earlier. It also recovered against the euro to finish at 75.63 from 75.74 yesterday.
Elsewhere, the common currency euro edged down against the dollar as data from Germany suggests business leaders in Europe's largest economy have become less optimistic about the future. In forward market today, premium for dollar remained weak due to sustained receiving from exporters. The benchmark six-month premium payable in May edged down to 125-127 paise from 126-128 paise and the far forward October 2018 contract also softened to 262-264 paise from 263.50-265.50 paise. On the global energy front, crude prices edged up as the Forties pipeline outage in the North Sea and voluntary production restraint led by OPEC supported crude, although soaring output in the United States put a cap on gains.
With PTI inputs