Mumbai: The rupee rose on 20 April 2007 to within striking distance of a nine-year high, as traders built short positions in the dollar on expectations that the Reserve Bank of India (RBI) was unlikely to intervene to check the rupee’s gains.
The rupee ended at 41.76/77 per dollar, rising sharply from the 19 April close of 42.065/080, and within sight of a 41.62 hit earlier this week, its highest since May 1998.
“Today’s rally was a reaction to the higher-than-expected inflation data,” said a dealer with a foreign bank. “With inflation still running high, RBI is unlikely to intervene against the rupee,” the dealer added.
Data released on 20 April showed inflation for the week ending 7 April at 6.09%, higher than analysts’ expectations.
The rupee is up about 4% this month and is trading 12% above a three-year low of 47.04 hit last July, buoyed by strong capital flows into the economy.
In a bid to thwart the rupee’s rise, RBI bought $19.7 billion in the four months ended February, and the market suspects it intervened aggressively in March as well.
RBI’s persistent intervention has fuelled inflation and money supply, both running above the central bank’s comfort band. Traders said RBI was unlikely to intervene on fears of stoking inflation.
“The rupee will probably touch 41.50 on Monday (23 April), they (the RBI) will not intervene in the market,” said Rohan Lasrado, chief dealer at HDFC Bank.