The Indian rupee has strengthened against the US dollar on Friday, to the highest level since March 20, on the back of foreign fund inflows for rebalancing portfolio by MSCI, according to foreign currency traders.
In a quarterly review, MSCI added 13 companies including PB Fintech Pvt., Indus Towers Ltd., and more to its Global Standard Index, and 29 companies to the Global Smallcap Index. The investment firm also removed three companies—Paytm operator One97 Communications Ltd., Berger Paints Ltd. and Indraprastha Gas Ltd.—from the MSCI India Index.
These changes will come into effect at the close of business hours on May 31.
At the time of publishing this report, the rupee was at 83.09 a dollar, as against 83.28 a dollar at close on Thursday. The rupee has gained persistently for nine consecutive days since May 14.
Further, banks who may have built long positions on the US dollar on the expectations that the rupee would weaken further, also winded up their bets on the greenback, a dealer with a large private bank said on the condition of anonymity.
Some stop-loss was triggered at around 83.20 and 83.12 a dollar, the treasury dealer said.
A fall in global crude oil prices also supported the sentiment for the rupee, currency traders said. Since India is a large importer of crude oil, any rise in the crude oil prices narrows the country's current account deficit.
However, rise in the Indian currency was staggered by dollar demand from importers above 83.15 a dollar, the dealer said. While there was speculation that Reserve Bank of India may have also purchased dollars to contain a sharp rise in the rupee, some traders believe the central bank may step in if the rupee gains above 83.00 a dollar.
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