BackRupee strengthens to 9-yr high
Rupee strengthens to 9-yr high
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Reuters
Mumbai: The Indian rupee strengthened through 41 per dollar for the first time in nine years on Wednesday as investors bet on continued capital inflows and that the central bank would not intervene for now to check it gains.
At 9:50 am, the rupee was at 40.90/91 per dollar, having traded as high as 40.86 — its strongest since May 1998, according to Reuters data. The gains follow a rise of more than 1% on Tuesday, when it closed at 41.10/12.
“The market seems to be convinced that in the short run the central bank won’t come in heavily to arrest the rupee’s rise," said R.K. Gurumurthy, chief currency trader at ING Vysya Bank.
“But going forward things may be a bit choppy, because while the the central bank won’t reverse the current trend, they might come in sporadically," added Gurumurthy.
With intervention seen less of an immediate concern, traders felt more confident to build positions in the rupee, even after the central bank took steps in a policy review on Tuesday to encourage more fund outflows as a way to ease pressure on the currency to rise.
The Reserve Bank of India did not tighten capital controls as many in the market had expected, and left its interest rates unchanged at the review.
The rupee is up 8.2% this year — the best performing Asian currency against the dollar. The next best performer is the Thai baht, which has gained about 3.8%.
The rupee has risen about 6% this month alone, and is trading 15% above a three-year low of 47.04 hit last July.
Still, some traders expressed caution about the rally after the central bank on Tuesday raised the ceiling for market stabilisation bonds, which it uses to sterilise funds pumped into the domestic money supply by its intervention.
The central bank bought a record $19.7 billion (Rs80,792 crore) in the four months to the end of February in a bid to thwart the rupee’s rise, and the market suspects it intervened in March as well.
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