US Market Firms Up, Asian Currencies Rebound, Rupee Gains by 100 paise in gap opening, Records Best Week in 4 years

MUMBAI: The rupee rallied by 100 paise to close at 80.81 against the dollar after the greenback weakened following lesser-than-anticipated inflation in the US. The currency opened 110 paise higher at 80.71 — the biggest gap opening in nearly a decade.

It touched an intraday high of 80.58 before closing at 80.81, 100 paise stronger, according to Reuters. With Friday’s gain, the domestic currency has appreciated 2% in the week — the best performance in four years.

With inflation in the US coming in at 7.7% as against expectations of 7.9%,analysts expect the US Fed to hike rates by 25 or 50 basis points (100bps= 1 percentage point) in December as against the 75bps rate moves in recent months.

Several emerging market currencies gained as the dollar index plunged. The South Korean won closed 4.5% stronger, its best performance since 2009. Other emerging market currencies, including the Thai baht, Malaysian ringgit, Philippine peso and Indonesian rupiah, gained more than the rupee. The Chinese yuan also gained 0.9% and reports of easing of Covid restrictions boosted markets.

“The gap opening of 110 paise vis-a-vis the dollar was huge. Dealers expect that the RBI would step in to stem the appreciation, which will also help to replenish the decline in reserves. RBI data shows that foreign exchange reserves, declining to $530 billion in the week ended November 4 from $531.1 billion as of October 28. Reserves were at $632.7 billion at the beginning of this year.