By Jaspreet Kalra
MUMBAI (Reuters) -The Indian rupee soared to post its best one-day gain in nearly four months on Wednesday, powered by firm central bank intervention supporting the currency while traders also cited unwinding of bearish wagers on the currency.
The rupee closed at 88.0750 against the U.S. dollar, up 0.8% on the day, its strongest performance since June 25.
The local unit had touched a peak of 87.9250 in early trading after the Reserve Bank of India stepped in forcefully to curb pressure on the rupee across both the local spot and non-deliverable forwards market, traders said.
Worries over the drag from steep U.S. trade tariffs, patchy foreign portfolio flows and a surge in precious metal prices had pinned the rupee close to its all-time low of 88.80 over the last two weeks but traders reckon that the pressure could ease following the central bank’s intervention.
“The market was a bit unfair in testing the central bank’s patience at these levels because nothing in the underlying balance of payments had changed to warrant this kind of weakening so far,” said Dhiraj Nim, an economist and FX strategist at ANZ.
The rupee had declined 2.8% over the year so far while India’s balance of payments position stood at a surplus of $4.5 billion in the April-June quarter, compared with a surplus of $5.2 billion a year earlier.
Meanwhile, data released on Wednesday showed that India’s merchandise trade deficit widened to an 11-month high of $32.15 billion in September, higher than economists’ forecast of $25.13 billion in a Reuters poll.
India’s trade negotiation team is currently in Washington and to hold talks with U.S. officials, a senior trade official said on Wednesday.
Elsewhere, the dollar index was down 0.2% at 98.8 after comments from Federal Reserve Chair Jerome Powell bolstered bets on a series of rate cuts in coming months.
(Reporting by Jaspreet Kalra; Editing by Ronojoy Mazumdar)
