Indian Rupee: Plunging Dollar To Aid

Indian Rupee: Plunging Dollar To Aid

Dec 02, 2020 03:12 IST capital market

The US dollar index, plunging to multi year lows is expected to aid gains in the Indian rupee in early trades on Wednesday, December 2, 2020. Positive developments on COVID-19 vaccine front, improved domestic macro-economic data and foreign fund inflows into domestic equities are all seen supporting the local unit.

On Tuesday, rupee opened at 73.93 against the US dollar and witnessed an intra-day high of 73.44 and a low of 73.93. The local unit finally closed at 73.68 against the American currency, registering a rise of 37 paise over its previous close. On Friday, the rupee had settled 17 paise lower at 74.05 against the US dollar.

Domestic equity benchmarks ended with strong gains on Tuesday. Barring the Nifty FMCG index, all the sectoral indices on the NSE ended in the green. The barometer index, the S&P BSE Sensex, soared 505.72 points or 1.15% to 44,655.44. The Nifty 50 index added 140.10 points or 1.08% at 13,109.05. Both the indices attained record closing high levels. Foreign portfolio investors (FPIs) bought shares worth Rs 3,242 crore, while domestic institutional investors (DIIs) were net sellers to the tune of Rs 1,043.21 crore in the Indian equity market on 1 December 2020, provisional data showed.

Overseas, Asian stocks were mixed on Wednesday as some investors booked profits after a stellar run, but hope for additional US economic stimulus and a coronavirus vaccine kept market sentiment well supported. In the United States, the main stock indices jumped on Tuesday, adding to their sharp gains from the previous month. The Dow climbed 185 points, helped by a 3% jump in Apples stock. The 30-stock average hit an intraday record in Tuesdays session. The S&P 500 climbed 1.13% to close at a record high. The Nasdaq Composite also notched a new record, closing up 1.28%, as the mega-cap tech stocks all closed in the green.

Sentiment got a boost after a group of lawmakers unveiled a $908 billion stimulus plan, however, Senate Majority Leader Mitch McConnell rejected the proposal later in the day. Still, investors are hopeful for a second stimulus package. Meanwhile, Pfizer and BioNTech have reportedly applied to the European Medicines Agency for conditional marketing authorization of their coronavirus vaccine. If authorization is granted, it could enable use of the vaccine in Europe this month.

Despite the positive vaccine data, Federal Reserve Chairman Jerome Powell called the economic outlook ?extraordinarily uncertain? on Tuesday when he and Treasury Secretary Steven Mnuchin spoke before Congress this week as part of mandated updates on CARES Act funding. Mnuchin did call on Congress for $300 billion in aid for restaurants heading into the winter months.

Meanwhile, the dollar stayed near a 2 1/2-year low on Wednesday as investors cautiously eyed developments in talks about further fiscal stimulus from the United States, while risk currencies held onto gains on improving risk appetite. Against major currencies, the dollar index fell 0.7% to 91.318, having hit its lowest level since late April 2018 of 91.263 overnight.

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