Rupee springs back 39 paise to close at 78.94 against US dollar

The rupee sprung back 39 paise -- its best single-day gain in over three months -- to close at 78.94 against the US currency on Wednesday after a sharp correction in crude oil, FIIs repositioning in capital markets and strong gains in local equties.

The Reserve Bank also raised overseas borrowing limits for companies and liberalised norms for foreign investments in government bonds on Wednesday which could further bolster the rupee.

At the interbank forex market, the local unit opened at 79.29 against the greenback and witnessed an intra-day high of 78.94 and a low of 79.37.

It finally settled at the day's highest level of 78.94, showing a sharp rise of 39 paise over its previous close. This is the best single day gain in the rupee since March 29.

In the previous session, the rupee had closed at an all-time low of 79.33 against the US dollar.

"The Indian rupee recovered on Wednesday from lower levels on positive domestic equities and sharp decline in crude oil prices. FII inflows also supported Rupee," Anuj Choudhary Research Analyst, Sharekhan by BNP Paribas said, adding that firm Dollar capped sharp gains.

A firm tone in the US Dollar and deteriorating global risk sentiments weighed on the investor sentiment.

"Any further foreign inflows may support the Rupee. Crude oil prices slipped below USD 100/barrel yesterday. If crude sustains below USD 100 mark, it may support Rupee at lower levels," Choudhary said.

The Reserve Bank of India (RBI) on Wednesday raised overseas borrowing limits for companies and liberalised norms for foreign investments in government bonds as it announced a slew of measures to boost foreign exchange inflows in efforts to curb the fall of the rupee.

Unveiling measures soon after the close of financial markets on Wednesday, the central bank said that all capital flows barring portfolio investments remain stable and an adequate level of reserves provides a buffer against external shocks.

Among the fresh steps, the cap has been removed on interest rate that lenders can offer on foreign deposits by NRIs. The relaxation will be in force till October.

The rupee has depreciated by 4.1 per cent against the US dollar during the current financial year so far (up to July 5), "which is modest relative to other EMEs and even major Advanced Economies (AEs)," RBI said in a statement.

Traders would also be looking at Federal Open Market Committee (FOMC) minutes too for clues to the Fed's possible rate hike paths, Choudhary said, adding that rupee may trade in the range of 78.50-80 in the next couple of sessions.

On the domestic equity market front, the BSE Sensex ended 616.62 points or 1.16 per cent higher at 53,750.97, while the broader NSE Nifty advanced 178.95 points or 1.13 per cent to 15,989.80.

The dollar index, which measures the greenback's strength against a basket of six currencies, was up 0.18 per cent at 106.72.

Recovering from a sharp 10 per cent decline on Tuesday, Brent crude futures, the global oil benchmark, rose by 1.26 per cent to USD 104.06 per barrel.

Reflecting hectic FII activity in the markets on Wednesday, foreign institutional investors bought equities worth Rs 7,355.76 crore while sold stocks worth Rs 7,685.89 crore, resulting in a net outflow of Rs 330.13 crore from the capital markets, according to provisional exchange data.