Rupee appreciated 40 paise against US dollar over GST reform optimism

Mumbai: The rupee appreciated 40 paise to close at 86.99 (provisional) against the US dollar on Tuesday, supported by optimism over GST restructuring and positive domestic equity markets.

Forex traders said rupee is expected to trade with a positive bias as easing worries over additional tariffs by the US boosted market sentiments after the meeting between US President Donald Trump and Russian President Vladimir Putin.

At the interbank foreign exchange market, the rupee opened at 87.24 against the US dollar, touched an intraday low of 87.31 and a high of 86.92, and settled at 86.99 (provisional), registering a gain of 40 paise over its previous close.

On Monday, the rupee appreciated 20 paise to close at 87.39 against the US dollar.

"The Indian rupee rose to the highest levels in a month on optimism over GST restructuring as announced by Prime Minister Narendra Modi at the Independence Day speech. Easing worries over additional tariffs by the US also boosted market sentiments," said Anuj Chaudhary, Research Analyst, Commodities and Currencies, Mirae Asset Sharekhan.

The present GST tax rates of nil/zero on essential food items, 5 per cent on daily use products, 12 per cent on standard goods, 18 per cent on electronics and services and 28 per cent on luxury and sin goods will be replaced by two tax slabs of 5 per cent and 18 per cent, plus a special 40 per cent top bracket for 5-7 demerit goods.

The proposed two-slab regime, if approved by the GST Council, will replace the current four slabs in the Goods and Services Tax (GST) regime, doing away with the 12 per cent and 28 per cent slabs.

"We expect the rupee to trade with a positive bias on upbeat domestic market sentiments due to GST rationalisation and fading trade tariff concerns. Falling crude oil prices and overall weakness in the greenback may also support the rupee," Chaudhary said.

However, increased demand of dollar by importers may cap sharp gains. Traders may take cues from building permits and housing starts data from the US. USD-INR spot price is expected to trade in a range of 86.70 to 87.40, Chaudhary said.

Meanwhile, Brent crude, the global oil benchmark, was trading lower by 1.04 per cent at USD 65.91 per barrel in futures trade, amid cautious optimism around the Ukraine-Russia conflict.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was lower by 0.13 per cent at 98.04.

On the domestic equity market front, Sensex climbed 370.64 points to settle at 81,644.39, while Nifty rallied 103.70 points to 24,980.65.

Foreign Institutional Investors bought equities worth Rs 550.85 crore on Monday, according to exchange data.