Rupee vs Dollar: As BJP set to win Karnataka, Rupee recovers from 16-month low

After depreciating for three-consecutive days, the Indian rupee has finally recovered on Tuesday against US benchmark dollar index at interbank forex market. However, in early opening, the domestic unit declined by 28 paise to a fresh 16-month low of 67.79 against the dollar amid gains in the US currency overseas.

In just a few hours of today's trading session, the Indian rupee eased to 67.585 above 0.105 points or 0.16% against US dollar.

Many reports are suspecting that the Reserve Bank of India must have intervened after it tumbled  near 16-month low in early trade.

As per Reuters report, state-run banks were seen selling dollars around 67.67 level, dealers said. The RBI typically intervenes in the foreign exchange market via state banks. The central bank likely sold dollars via state banks at 67.67 level to stem the rupee fall, said dealers.

Anindya Banerjee analysts at Kotak Securities said, "Dollar Rupee is trading weak, around 67.56/57 levels on spot, after a brief spike to 67.79 levels. Oil is inching closer to 79 handle and US 10 year bond yields are above 3.01%. Global macros are negative for Rupee this morning. However, the day could be determined by local political events, viz., Karnataka elections. Early trends indicate BJP could emerge as the single largest party. Such an outcome will be positive for Rupee, and that could be a reason why the local unit has appreciated by 23 paise from lows."

Karnataka Election results has pushed BJP into the front with the party leading in 113 seats, JDS in over 40 seats, while  Congress leads in 60 seats. 

Banerjee added, "We would not be surprised if USDINR comes down towards 67.35/40 levels on spot, which is the next trendline support. If prices fail to hold that level, then corrective decline can extend towards 67.00/05 levels on spot. We exited our longs in the morning spike and would wait for a lower levels to re-enter. The two levels we would watching are the ones we mentioned. The downtrend should be seen as a correction within an intermediate uptrend, which can take prices to 69."

In previous trading session, the domestic rupee had lost 18 paise to end at a fresh 16-month low of 67.51 against the US currency on heavy dollar purchases and sustained fund outflows from equities. However, foreign investors continued to remove their money from Indian market, as on Monday, there was outflow of Rs 2,591.11 crore made by these investors cumulatively in equity, debt and hybrid market, 

Meanwhile on Tuesday, the benchmark Sensex was trading at 35,929.41 above 372.70 points or 1.05%, on the other hand, Nifty 50 was up 100.50 points or 0.39% trading at 10,907.10.