Dollar Index: Dollar index touches a 4-month low, rupee gains

Mumbai: The dollar index touched a four-and-a-half-month low at 103 levels on Friday, easing from around 110 in early January when it was driven up by safe haven dollar demand. Consequently, all Asian currencies, including the rupee, strengthened, with the Indian currency logging its best weekly gain in over two years to close at 86.87 to the dollar.

The dollar index is used to measure the US currency’s strength against a basket of six currencies: the euro, Swiss franc, Japanese yen, Canadian dollar, British pound and Swedish krona.

The dollar index was pressured by disappointing US non-farm payroll data, which showed fewer than expected job addition, according to Reuters. Markets have been heavily long on the dollar and this is unwinding now, traders said. Due to this, traders also expect the rupee to strengthen further. But “the window to appreciation would be small as risks of a trade war still persists”, said Anindya Banerjee, head of currency research at Kotak Securities. The rupee has consistently weakened since January and logged its record intraday low of 87.95/$1 on February 10.
The Reserve Bank of India has conducted $15 billion of dollar rupee buy-sell swaps in the past month, increasing demand for the US currency. The RBI has scheduled another $10 billion swap on March 24.