Forex: Breaking an uninterrupted four week retreat

the rupee staged a spectacular rebound against the American currency and ended at an over three-week high of 64.45 on the back of heavy dollar unwinding amid buoyant domestic equities.

It has been a quiet start to a busy week in the forex market with volatility focused on Federal Reserve chief Janet Yellen's testimony on monetary policy.

The home currency displayed some signs of exhaustion and nervousness initially in view of key macroeconomic data releases including the IIP and inflation data.

Asian market currencies breathed a sigh of relief as sense of calm returned during mid-week after Fed Chair Yellen expressed uncertainty about the effects of tightening on inflation and relayed a cautious outlook as investors recalibrated their expectations for a slower pace of tightening in the US.

A steady stream of dollars from export receivables and overseas remittances alongwith a breathtaking record rally in local equities predominantly supported the recovery momentum.

Bearish greenback overseas tone also weighed in.

The home currency resumed a tad higher at 64.57 from weekend closing level of 64.60 at the Interbank Foreign Exchange (forex) market.

It later made a spirited recovery to hit a fresh one-month high of 64.39 on Thursday before ending at 64.45, revealing a smart rise of 15 paise, or 0.23 per cent.

The rupee had depreciated by a whopping 36 paise against the dollar in the last four-week fall.

On the domestic marco front, retail inflation hit a "historically low" level of 1.54 per cent in June, while industrial output growth slumped to 1.7 per cent in May from 8 per cent a year-ago amid expectations of a rate cut from the Reserve Bank of India next month.

Foreign funds turned buyers after recent spell of selling and and bought Indian equities worth USD 121.88 mln as per provisional data from stock exchanges.

The country's forex reserves declined marginally by USD 161.9 million to USD 386.377 billion in the week to July 7 due to a fall in foreign currency assets, RBI data showed.

In the previous week, the reserves had touched a life- time high of USD 386.539 billion after rising by USD 4.007 billion.

The RBI, meanwhile fixed the reference rate for the USD at Rs 64.4539 and Euro at Rs 73.5677, respectively.

In worldwide trade, the greenback ended lower against all major trading rivals after Fed Chair Yellen expressed uncertainty about the effects of tightening on inflation and relayed a cautious outlook as investors re-calibrated their expectations for a slower pace of tightening.

Surprisingly weak U.S. economic reports also bolstered expectations that the U.S. Federal Reserve would likely to move slowly to continue raising interest rates in the absence of inflation signs.

The dollar index a measure of the US currency against a basket of six trade-weighted peers ended lower at 94.90 as against 95.78 previously. (MORE)

(This article has not been edited by DNA's editorial team and is auto-generated from an agency feed.)

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