Rupee watch: INR revives from multi-month low on Moody's rating

Mumbai: The Indian rupee staged an euphoric rally from its multi-month low and ended firmly higher at 65.01 against the US dollar after Moody's upgraded the country’s sovereign credit rating.

Overall forex market witnessed a sudden revival in sentiment towards the tail-end session to offset the fears of renewed fiscal slippage following a sudden spike in global crude prices along with a slew of weak macro-economic data releases.

Stamping one of the most significant milestones, the global credit rating agency Moody's on Friday upgraded India's sovereign credit rating by a notch to 'Baa2' with a stable outlook on expectations of continued economic reforms and improved growth prospects.

The rating upgrade comes after a gap of 13 years - Moody's had last upgraded India's rating to 'Baa3' in 2004.

Wide-ranging reforms have been undertaken in the last few months and that have led to improved investment climate. There is an air of optimism on India's economic prospects and created an ambiance of feel good factor following Modi government's continued commitments towards strong governance and sweeping reforms measures, a forex dealer said.

The home currency had plunged to hit a fresh one-month low of 65.54 at the start of the week stunned by risk of another oil shock.

Surging crude prices could could hurt fiscal deficit target of the government for current year and spur market concerns over the nation's inflation outlook. India is the second-largest crude oil consumer in Asia after China.

A breathtaking rally on domestic equities further supplemented the currency momentum in a health way.

At the Interbank Foreign Exchange (forex) market, the home currency resumed substantially lower at 65.38 on the back of immense dollar pressure v/s last Friday's close of 65.16.

It later witnessed wide swings between 65.5400 and 64.6000 in the face of Moody's rating developments before concluding the highly volatile week with a smart gain of 15 paise, or 23 per cent at 65.01.

Suspected intervention by central bank officials through state-run banks believed to have crubed sharp recovery towards the fag-end of the week, resulting rupee to gave back some early strong gains.

Foreign institutional investors (FIIs) and funds were remained net buyers of Indian equities and bought USD 712.85 mln as per stock exchanges data.

Meanwhile, Foreign investors pumped in a staggering USD 1.5 billion in the Indian equity markets this month so far, propelled by the government's Rs 2.11 lakh crore bank recapitalisation plan.

The Indian currency had fallen 61 paise last week to the dollar.

The RBI fixed the reference rate for the USD at Rs 64.8462 and euro at Rs 76.5574, respectively.