Indian rupee firm after 2016 Union budget

Indian rupee witnessed the sixth straight rally on Friday and surged to a fresh two and half months high of 67.08 by gaining another 26 paise against the US dollar.

The Indian rupee is on a firmer footing just days after the announcement of the Union Budget 2016 and expected to maintain the trend, according to an industry expert.

Indian rupee witnessed the sixth straight rally on Friday and surged to a fresh two and half months high of 67.08 by gaining another 26 paise against the US dollar.

For the week, the rupee has shot up by a whopping 154 paise, or 2.24 per cent. The rupee opened this year at 66.17 against the greenback. The budget stopped the free-fall of Indian rupee that crossed 68 during the year.

"Even with the rupee gaining strength, it being the beginning of the month and salaries in the hands of people, the number of transaction as well as volume sent across to India is expected to remain on par with normal performance for the time being," Adeeb Ahamed, CEO, LuLu International Exchange, told Khaleej Times.

Last Monday, India's finance minister Arun Jaitely unveiled an Rs19.8 trillion, or $289 billion, budget that aims to cut the central government deficit while spending heavily on rural infrastructure.

On the budget day, domestic bonds and the rupee rallied after Jaitley said the government would stick to its fiscal deficit target for 2016-17, raising expectations the country's central bank may cut interest rates before its next policy review in April.

The rupee had fluctuated between 18.35-18.65 to UAE dirham this past one month. The year had begun with the rupee at 17.96 to UAE dirham, and it will only be a matter of time before the rupee returns to sub-18 levels.

"According to current trends, the rupee is strengthening on the back of good market scenario in India and across the world in general," Ahamed said.

The rupee also strengthened on hopes the budget would support economic growth and attract more foreign inflows. Traders hoped the government's decision could spur the Reserve Bank of India to cut interest rates by 25 basis points.