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NEW DELHI – The rupee strengthened versus the US dollar as the retreat of the greenback from near-20-year highs boosted risk appetite for emerging market currencies, dealers said.

The partially convertible rupee opened at 77.4790/$1 as against 77.5825/$1 at the previous close. The Indian currency, which was last at 77.4600/$1, moved in a band of 77.4410-77.7700/$1 so far in the day.

The US dollar index, which earlier this month had climbed to its highest level in close to two decades, fell sharply this week.



The index was last at 101.92 as against 103.15 at the end of the previous week. Earlier this month, the index, which measures the US dollar against six major rival currencies, had climbed to 105.

The US currency has strengthened sharply in 2022 because expectations of aggressive rate hikes by the Federal Reserve have led to global funds flowing out of emerging markets such as India towards the world’s largest economy.

Foreign institutional investors (FIIs) have offloaded a massive Rs 1.6 lakh crore worth of Indian equities so far in 2022. These players have also sold more than Rs 14,000 crore worth of domestic debt over the same period.

The continuing war in Ukraine and concerns of a global growth slowdown had also contributed to the strength of the dollar by sending risk-averse investors to the safety of the US currency.

However, even as the rupee has hit record lows versus the dollar this month, the depreciation in the domestic currency has been kept in check by aggressive interventions by the Reserve

, dealers said.

The latest data showed that the RBI’s total foreign exchange reserves were at $593 billion as of May 13. This is significantly lower than $633 billion as of December 31, 2021, suggesting aggressive sales of dollars by the central bank, dealers said.

Of late, the central bank has been said to be intervening in the form of dollar sales not only in the spot market but also in the forwards segment, dealers said.

Even as the rupee gained on Wednesday, elevated crude oil prices and caution before the release of the minutes of the Federal Reserve’s latest meeting reined in the strength of the local unit.

“Over the last 7 to 8 trading sessions, the pair was seen trading into a very tight range of 40 paise as there was a tough fight between bulls (importers and FII’s withdrawal) and bears (Exporters, RBI, and FDI),” CR Forex Advisors MD Amit Pabari said.

“Despite a fall in US DXY in recent days, the traders are not betting on a long carry in Rupee. The reason could be the risk of faster RBI rate hike bets impacting the economy and elevated inflation pointing to negative real yields.”

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