Rupee sees biggest weekly gain in seven as dollar wallows

The partially convertible rupee closed up 0.2% to 79.58, having hit a session high of 79.4850. It notched weekly gains of 0.3%, its best performance since week ended July 29.

The dollar index shed 1.2% to trade under 109 after the European Central Bank hiked rates and promised more, boosting the region’s single currency.

Risky assets had a field day on the dollar’s woes, with Asian stocks and currencies rising across the board. Indian stocks rose 0.2% and benchmark bond yields firmed 3 basis points to 7.1669%.

“Main reason is the dollar index cooling off,” said Kunal Sodhani, vice president of the global trading center at Shinhan Bank.

“With ECB’s hawkish tone and trajectory, EUR/USD pair rallied which in turn pushed dollar index lower. Oil price persisting lower, along with equity inflows are also helping the rupee,” he added.

Oil prices rose to $90 per barrel on Friday, but were set for a second weekly decline as aggressive interest rate hikes and China’s COVID-19 curbs weighed on the demand outlook.

Meanwhile, the People’s Bank of China’s official guidance on the yuan helped it recover some losses and ensure the currency wouldn’t cross 7.0 per dollar mark this week, providing some relief to the Asian currency complex.

Markets now await India’s August inflation data due on Monday, which is likely to trend higher, a Reuters poll found, adding pressure on the Reserve Bank of India to hike interest rates more aggressively in the coming months.