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Rupee appreciates to 81.58 as dollar retreats from 20-year high

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Rupee appreciates to 81.58 as dollar retreats from 20-year high

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After falling to record lows for three sessions in a row, rupee on Tuesday appreciated to close at 81.58 vs dollar as greenback retreated from two decade high. Oil prices moved higher but not away from eight month low.

The rupee closed at 81.58 vs dollar on Tuesday, four paise above the currency's all time closing low. Rupee opened 13 paise higher at 81.49 against the US dollar on Tuesday in a rebound after hitting a record closing low of 81.62 the previous day. Easing crude crude oil prices relative to their recent peaks and a retreat in the greenback from 20-year highs against six other peers supported the rupee.

The dollar index — which measures the American currency against the euro, the franc, the yen, the Canadian dollar, the pound and the krona — was last down 0.4 percent at 113.6, though not far from the 20-year peak of 114.4 hit on Tuesday.
Brent crude and West Texas Intermediate futures rose 0.6 percent each. Brent has, however, retreated about 40 percent from the highest level of the year so far.
"The RBI has offloaded tonnes of dollars from its forex reserves... While it does that, it has to buy the rupee to sell the dollar. This passive buying of the rupee, along with being on a hiking spree to tame inflation following the Fed, has led to a severe liquidity scarcity in the banking system," said Amit Pabari, Managing Director at CR Forex Advisors.
Further selling by the RBI in the spot market can cause severe damage to the economy. "The RBI can’t go aggressive in selling, and hence the rupee can be seen moving towards 82.00-82.50 levels, further as now importers will buy in a rush and exporters shall get complacent," he added.
Finance Minister Nirmala Sitharaman at the Network18 Exclusive Townhall on Monday said that the Indian rupee is holding out really well. "The rate of fall of other currencies to the dollar has been sharply higher than the rupee. We are much better than many countries where the currency has fallen pathetically against the dollar," she said.
Indian equity benchmarks Sensex and Nifty50 reboudned from two-month closing lows on Tuesday, helped by strength in financial, IT, FMCG and oil & gas shares.
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