The Hindu : Business : Rupee climbs to nine-year high

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Tuesday, Apr 17, 2007
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Rupee climbs to nine-year high

Dollar selling by exporters aids sentiment

MUMBAI: The rupee on Monday climbed to a nine-year-high as it breached the 42-mark to close at 41.90/92 against the dollar, which was sold heavily by exporters amid sustained foreign institutional investment inflow into the equity market. The rupee closed at 42.52 on April 13.

The Indian unit's closing, the highest since June 1998, was also boosted by the absence of any intervention by the Reserve Bank of India and dollar demand from oil companies.

In active trading at the interbank foreign exchange market, the Indian unit surged by unprecedented margins after resuming steady at 42.51/52 a dollar and touching an intra-day high of 41.88 due largely to panic selling by exporters, who attempted to protect their earnings, after the RBI kept aloof from the market. It has gained about 1.4 per cent in a single session on Monday on sustained dollar selling.

The rupee has gained 5.3 per cent so far in the current year, becoming the top performing currency in Asia. It soared by more than six per cent after closing at a low of 44.63/64 on March 5, mainly because of liquidity crunch in the banking system, forex dealers said.

Finance Minister P. Chidambaram's statement on Sunday that the rupee was still competitive at current levels only indicated the central bank's unwillingness to intervene to check the Indian currency's surge. Mr. Chidambaram attributed rupee's appreciation to this level to strong inflow of capital FDI (foreign direct investment), FII (foreign institutional investment), export earnings and remittances — considered healthy for the country.

The apex bank remained a silent spectator since March, allowing the rupee to appreciate sharply.

Foreign direct investment (FDI) into the country had risen to $4.9 billion in the quarter ended December 2006 from $2.7 billion in the preceding quarter, according to the data released by the government.

The RBI, however, fixed the reference rate for the U.S. currency at Rs. 42.30 and for the single European unit at Rs. 57.33.

The rupee premiums on forward dollar ended sharply higher on sustained paying pressure from banks and corporates.

In cross currency deals, the rupee rallied sharply against the British pound sterling, the euro and the Japanese yen. — PTI

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