The US dollar fell to its lowest level in three and a half months after it traded at Rs165 in the interbank market on Thursday.
The greenback was down 70 paisa in the opening hours of trade. The last time it traded at this level was on June 18. The interbank trend is usually followed by the open or cash market. The dollar was trading at Rs166 in the cash market at the close of business on Wednesday.
On March 27, the dollar had reached an all-time high of Rs169 after rising Rs11 in as many days before a central bank intervention brought it down. That sudden rise was primarily because of a cut in the policy rate, triggering an outflow of $1.67 billion from the country’s debt market in March alone.
Following that increase, everything paid for in dollars became expensive. For example, all automakers rose their prices correspondingly because they import up to 60% of their parts. However, the dollar has mostly traded in the range of Rs165 to Rs167 since then.
The dollar became weaker in the international market as well. This was because fresh manufacturing data pointed to some recovery and reports of a fresh stimulus package by the US government. President Donald Trump has proposed a $1.5 trillion coronavirus package to revive economic growth, which raised investors’ confidence as markets rallied, pushing the dollar to a week’s low in the international market.