Rupee rises by 16 paise to 74.46 against dollar on COVID vaccine boost

The rupee on Tuesday appreciated by 16 paise to settle at 74.46 against the US dollar as positive news on coronavirus vaccine boosted appeal for riskier assets.

Besides, a weak dollar overseas also supported the local unit.

At the interbank forex market, the domestic unit opened strong at 74.43 against the US dollar and later touched a high of 74.38 in day trade.

The local unit finally closed at 74.46 against the US dollar, registering a gain of 16 paise over its previous close. On Friday, the rupee had settled at 74.62 against the US dollar. Forex market was closed on Monday on account of Balipratipada.

Analysts said that dollar purchases by the RBI, however, capped the rupee gains.

"The Indian rupee appreciated against the US Dollar for the second consecutive session amid improved risk appetite in the region supported by news of another potentially effective coronavirus vaccine," said Sriram Iyer, Senior Research Analyst at Reliance Securities.

However, greenback purchases from PSU banks, likely on behalf of the central bank, along with dollar demand from importers offset gains, Iyer added.

US-based biotechnology giant Moderna on Monday announced that its COVID-19 vaccine has shown to be 94.5 per cent effective in preventing the deadly disease, bringing a glimmer of hope to a world ravaged by the coronavirus pandemic.

Cambridge, Massachusetts-based Moderna's announcement comes just a week after Pfizer and BioNtech said their COVID-19 vaccine candidate was found to be more than 90 per cent effective in preventing COVID-19 in participants.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, dropped 0.24 per cent to 92.41.

On the equity front, the 30-share BSE index rallied 314.73 points or 0.72 per cent to close at 43,952.71 and the broader NSE Nifty gained 93.95 points or 0.74 per cent to settle at 12,874.20.

Brent crude futures, the global oil benchmark, rose 0.18 per cent to USD 43.90 per barrel.

According to Saif Mukadam, Research Analyst, Sharekhan by BNP Paribas, Indian rupee appreciated amid weakness in the dollar and rise in risk appetite in the global markets.

"Markets sentiments improved on positive development over coronavirus vaccine. However, sharp gains were prevented on worries over economic recovery due to mounting coronavirus cases across the globe," Mukadam said.

Many countries in Europe and states in the US are tightening COVID-19 restrictions to curb the spread of the pandemic.

"Fund inflow by the FIIs is keeping the rupee higher but at the same time intervention by the RBI is keeping rupee gains capped," said Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services.

Jateen Trivedi, Senior Research Analyst (Commodity & Currency) at LKP Securities said that the rupee saw some weakness as RBI bought dollar in spot and then undertook sell/buy swap in forward to neutralize rupee liquidity.

The central bank through nationalised banks was seen buying dollar in spot market at around Rs 74.40 mark levels to keep the rupee from appreciating due to inflows into local stocks and weak dollar owing to news of another promising vaccine, Trivedi added.