FII inflows lift Rupee by 1.4 percent to 51.46 vs dollar

MUMBAI: Expectations of foreign institutional investors bringing in around Rs 50,000 crore by investing in Indian corporate and government debt cheered up the currency market, helping the battered Indian rupee gain 1.4% to the US dollar.

The six major central banks' decision to slash overnight dollar swap rates by 50 basis points, to ease dollar liquidity in the international markets came in as a relief to traders fearing dollar shortage. The rupee closed 1.4% higher at 51.46 to the dollar in the day.

“Main triggers were the dollar weakening in the international markets as well as the resounding success of the Sebi auction of government securities and corporate bonds,” said Harihar Krishnamoorthy, head, treasury, FirstRand Bank. However, analysts are skeptical about the sustainability of the recovery in the local currency, as emerging growth risks could hamper the portfolio inflows.

“The combination of an uncertain global backdrop and rising growth risks continues to cloud the outlook for portfolio inflows. It is too early to say that the worst is over for the currency,” said Priyanka Chakravarty, forex strategist, Standard Chartered Bank.