Rupee rally derails, down 22 paise on dollar surge

The rupee faced a temporary hitch and retracted from its two-year high to close at 63.80 a dollar by tumbling 22 paise after the four-day strong rally lost momentum on sharp recovery of the US currency.

Overall forex market sentiment witnessed a sudden revival of the elasticity pessimism following renewed dollar strength worldwide as stronger-than-expected US jobs report triggered a supportive shift in the Fed policy outlook.

In a strong showing, the home currency, which was stuck in a broad range for many months, scripted its biggest rally last week since early 2015 to reclaim fresh multi-year highs.

Robust foreign fund inflows and expectations of more aggressive reform measures in the midst of improving macro environment provided much needed impetus for the renewed vigour.

It had appreciated by good 61 paise in the four-day rally last week on the back of broad-based US dollar weakness.

The dollar sell off has been due to US Fed rate hike uncertainty and President Donald Trump's pro growth initiatives that have struggled to get government support and weekend.

Domestic equities ended on a weak note on the back of continued selling in healthcare and technology stocks and also rich valuations after recent record rally even as investors' showed lethargic response to good corporate earnings outcome.

The domestic unit resumed with a gap-down at 63.71 from last weekend close of 63.58 at the Interbank Foreign Exchange (forex) market on fresh bouts of dollar demand from banks and importers.

It remained under immense pressure throughout the day and hit a low of 63.85 towards the fag-end trade before concluding at 63.80, revealing a sharp loss of 22 paise.

The RBI, meanwhile, fixed the reference rate for the dollar at 63.7375 and for the euro at 75.1019.

The dollar index, which measures the greenback's value against a basket of six major currencies, rose marginally to 93.37.

In cross-currency trades, the rupee hardened further against the pound sterling to finish at 83.25 from 83.56 per pound and rebounded against the euro to settle at 75.25 from 75.48 earlier.

It also recovered against the Japanese yen to close at 57.57 per 100 yens from 57.79.

In worldwide trade, the dollar managed to hold the bulk of its gains on Monday after an upbeat US jobs report lifted it off 15-month lows.

The greenback had tumbled to multi-month lows after a series of weak US indicators added to uncertainty about the Federal Reserve's plan to start trimming its bond portfolio and the pace of rate hikes amid political turmoil gripping Washington.

Elsewhere, the euro turned lower against the US dollar after hitting the highest level since January 2015.

In forward market today, premium for dollar declined owing to sustained receivings from exporters.

The benchmark six-month premium payable in January edged down to 137-139 paise from 138-140 paise and the far forward July 2018 contract also eased to 271-273 paise from 272-274 paise last Friday.

On the International commodity front, crude prices drifted lower, though held near its nine-week highs largely supported by robust US jobs data last week and a slight fall in the US drill rig count.

Global benchmark Brent crude futures were down 6 cents at USD 52.36 a barrel in early Asian trade.