Mumbai: The rupee staged an incredible comeback against the US Dollar after a brief slippage and ended at a fresh two-week high on the back of healthy portfolios inflows and country's narrowing current account deficit (CAD).
Outperforming significantly against the greenback, the home currency settled at 66.65 with a solid 32 paise gain during the week.
Investors and currency traders rejoiced as sentiment turned highly buoyant after the US Federal Reserve expectedly left the policy rate unchanged,largely discounting a September rate hike amid easing worries of foreign fund outflows.
Intense speculation and hawkish comments from various Fed officials about an imminent Fed rate hike have led to lacklustre trading in the foreign exchange market throughout the past few weeks and also impacted by devaluation rumours of the domestic currency.
The dollar also remained broadly lower against a basket of other major currencies too. The improvement in the current account deficit alongside modest unwinding of long dollar positions by banks ahead of the weekend and tepid demand for the greenback from importers largely helped rupee to regain its strength, a forex dealer commented.
Though, trading was extremely thin and lethargic as there are no fresh reasons to buy or sell the Indian currency, he added.
The country's current account deficit (CAD) narrowed sharply to just USD 300 million, or 0.1 per cent of GDP, in the June quarter, driven by lower trade deficit on deeper import contraction.
A lower CAD provides stability to rupee. The rupee resumed a tad higher at 66.96 as compared to last Friday's closing value of 66.97 at the Interbank Foreign Exchange (forex) market.
But it failed to keep momentum going and quickly turned volatile to hit a low of 67.1450 during the mid-week trade following sudden bouts of dollar demand from importers and lacklustre equities.
However, rupee regained lost ground aftermath of Fed outcome and touched a high of 66.62 before concluding at a fresh two-week high of 66.65, revealing a smart rise of 32 paise, or 0.48 per cent.
It had depreciated by 29 paise last week.
