Mumbai: The rupee climbed to its highest level in eight years on 13 April as banks sold dollars after the US unit weakened against the euro and yen, while the Reserve Bank of India kept away from intervening.
The rupee closed at 42.51/52 a dollar — its strongest since 6 April 1999, and up 0.8% from the previous close of 42.84/85.
Analysts said they expected the rupee to strengthen further due to rising foreign remittances and other inflows. India’s foreign exchange reserves rose to more than $200 billion for the first time on 6 April 2007, data released on 13 April showed.
“The rupee touching 42.30 is on the cards,” a senior state-run bank trader said.
The unit has risen more than 10.5% from a three-year trough of 47.04 last July.
“Currently, the focus is very much on inflation management and as such RBI intervention in forex market is not likely to be in large doses,” Shubhada Rao, chief economist with Yes Bank said.
In February, the central bank had bought a record $11.9 billion from the currency market to try slow down the rupee’s surge and help exports remain competitive.
The rupee is currently overvalued by 11%, up from 8.3% a month ago, according to a JPMorgan index.
The central bank, which raised a benchmark interest rate five times in the fiscal year that ended in March, reviews policy on 24 April.