The rupee has pared its initial gains and settled at 83.89 against the dollar on Monday, after peaking at 83.80 in the early hours of trade, as it reinforced a weakening trend against the US currency that saw it plumbing to lows of 83.96 earlier this month.

Forex traders said the rupee gained in morning trade largely as a result of the weakness in the greenback after US Federal Reserve chair Jerome Powell said last week that the time has come to cut interest rates in the US.

The rate cut signal has driven up stocks and global currencies.

At the interbank forex market, the rupee opened at 83.83 against the dollar and touched an intraday high of 83.80 and a low of 83.91.

The dollar index, which measures the currency against a basket of six global currencies, was at 100.82, just off its 13-month low of 100.60 reached at the end of last week amid prospects of US rate cuts in September.

However, the rupee still remains the weakest currency in Asia having lost 0.5 per cent of its exchange value since April.

The slide has followed the continuous exodus of dollars as FPIs (foreign portfolio investors) pulled money out of the markets. FPIs have already pulled out ₹16,305 crore this month from equities because of the unwinding of yen carry trade and ongoing geopolitical conflicts.

The demand for dollars is also very strong among importers, and the RBI’s repeated interventions to hold the rupee between 83.90 and 83.95 has also driven the Indian currency.

“We expect the rupee to trade with a slight positive bias on risk in global sentiments amid dovish Fed speak and rising expectations of a rate cut by the Fed in September. However, geopolitical tensions in West Asia and rising crude oil prices may cap a sharp upside,” said Anuj Choudhary, research analyst at Sharekhan by BNP Paribas.

“The rupee is expected to be in a range of 83.75/95 with the Reserve Bank buying dollars at lower levels of the pair and selling near 83.95,” said Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP.

Former chief economic adviser Krishnamurthy Subramanian — who was in Calcutta last week — said historically, the rupee had fallen on an average by 3-3.5 per cent since 1980s.

But he expects the rupee to slide at the rate of 1 per cent annually between now and 2047.

The World Bank’s executive director believes the Indian economy will swell with its GDP ballooning to $55 trillion by 2047 from the current levels of over $3 trillion.

“Instead of 3.5 per cent rate of depreciation which is what has prevailed in the past for the rupee, the rate of depreciation that I expect is likely to be less than 1 per cent,” Subramanian had said.

Meanwhile, India’s forex reserves jumped $4.5 billion to $674.6 billion during the week ended August 16.

In the previous week, the forex kitty dropped $4.8 billion to $670.119 billion.

Stock surge

Stock market benchmark indices Sensex and Nifty surged nearly 1 per cent on Monday, propelled by intense buying in metal, IT and consumer durable stocks amid hopes the US Federal Reserve will start cutting interest rates soon.

Renewed foreign fund inflows and buying in frontline stocks HDFC Bank and Reliance Industries further bolstered investor sentiment, traders said.

Rising for the fifth straight day, the 30-share BSE Sensex jumped 611.90 points or 0.75 per cent to settle at 81698.11. During the day, it surged 738.06 points or 0.91 per cent to 81824.27.

The NSE Nifty soared 187.45 points or 0.76 per cent to 25010.60, registering gains for the eighth session in a row.

Anil stocks

Shares of Anil Ambani-led group plunged on Friday after Sebi barred him and 24 other entities, including former key officials of RHFL, from the securities market for five years for diversion of funds from the company.

Reliance Infrastructure tumbled 10.07 per cent to settle at ₹211.70 on the BSE. The stock fell 10.91 per cent to close at ₹209.99 on the NSE.

Reliance Home Finance Ltd shares fell 5 per cent to close at ₹4.46 on BSE.

Reliance Power shares also dropped 5 per cent to hit the lower price band of ₹34.48 on the NSE and 34.45 apiece on the BSE.