The Indian rupee has appreciated against the US dollar and is trading at a 3-week high, the levels last seen on April 7, led by improved risk appetite. On Wednesday, the rupee extended the early gains and was trading higher by 29 paise at 75.89 per dollar amid buying in the domestic equity market.

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“The USD/INR spot opened below 76 and going ahead the spot will continue to fall towards its crucial support of 75.60-75.50 on optimism that few countries are easing their lockdown restrictions amid hopes of no rate cut by the US Federal Reserve,” said Rahul Gupta, Head of Research-Currency, Emkay Global.

Dollar inflows related to the Reliance Industries and Facebook deal along with the easing of lockdown restrictions helped in the appreciation in the Indian currency, he added.

However, analysts expect that the strength in rupee will not sustain and the spot will bounce back towards 77 again in the coming sessions. One of the key reasons is that there are surfacing risks of the second wave of coronavirus infection and this will strengthen the dollar going ahead.

“Crucial support for USD/INR is located around 75.50 and then at 75.30 levels. We can expect a reversal from these areas towards 76.50/77 zone,” Gupta added.

Coining the same views, Sugandha Sachdeva VP-Metals, Energy & Currency Research, Religare Broking said that the bias for the rupee is skewed on the downside since economic risks stemming from the virus still remain.

"Although there is some respite, for the time being, rupee bulls will have to gauge whether the impact sustains. The domestic currency is seen trading in a band of 75.20 to 76.60 in near term," Sachdeva added.

First Published:Apr 29, 2020 2:24 PM IST