The rupee made a sharp recovery to end 9 paise stronger against the dollar at 59.60 on lower trade deficit data and a stronger domestic equity market.
June trade deficit narrowed to $12.24 billion from $20.1 billion in May, due to a decline in gold imports thereby helping to ease pressure on the current account deficit. This boosted the rupee in the late afternoon trading session.
Though exports in June declined by 4.6 per cent, for the second consecutive month.
The domestic unit opened weaker on Friday at 59.79 from its previous close of 59.69 on Thursday due to a stronger American currency. The unit declined in the afternoon trading session to a low of 60.16 weighed down by heavy demand for dollars from oil import companies.
However, positive trade deficit data and domestic equity market supported the currency to strengthen to its intra-day high of 59.60.
The BSE benchmark Sensex rallied 282 points (1.44 per cent) to close at 19,959 points.
The rupee remained largely volatile by moving 56 paise during the day.
On Thursday, the rupee had ended flat amid a volatile trading session after the US Federal Reserve chief indicated that the need for fiscal stimulus has not ended.
According to Dharmakirti Joshi, Chief Economist, Crisil, “The emerging economies are facing a current account deficit (CAD) problem and right now our ability to attract capital flows is low. Hence, the measures by the government to finance the CAD by attracting more capital flows should support the currency.”
“Though, a lot of the stability in the rupee will depend on the global volatility and risk appetite of the investors. In the shorter term, the volatility in the rupee is set to continue,” Joshi said.
Call rates, Bonds end weaker
The interbank call money rates closed lower at 7.15 per cent from its previous close of 7.30 per cent.
The widely traded 8.33 per cent government bond, maturing in 2026, ended weaker at Rs 105.39 from Thursday's close of Rs 105.92, while yields hardened to 7.66 per cent from 7.60 per cent.