By Anoop Agrawal/Bloomberg
Mumbai: Ending three days of gains, the rupee fell on 17 April on speculation that importers sold the currency to pay bills after the currency rose to its strongest in almost nine years.
The rupee gained 3.5% this month reducing the cost of buying foreign exchange for refiners to settle overseas payments. The rupee is the world’s second-best performer in April as foreign investors plough money into the country’s fast-growing economy.
“Importers may have bought dollars as the rupee was finding it difficult to rise beyond a point,” said Puneet Sharma, chief dealer at state-owned Allahabad Bank in Mumbai. “I think the rupee will begin to decline a bit now.”
The currency fell 0.2% to 41.97 against the dollar as of the 5pm close in Mumbai. It reached 41.6450, the strongest since 1 June 1998, earlier on 17 April.
India’s imports rose 25.1% to $14.36 billion (Rs60,438 crore), from a year ago, the commerce and industry ministry had said on 2 April. The nation meets three-quarters of its energy needs from abroad.
The local currency rose earlier on speculation that exporters bought the currency to protect earnings.
The finance minister on 15 April said the rupee was “still very competitive”, suggesting the currency may be allowed to rise further. “Exporters are looking to sell dollars before the rupee appreciates further,” said L.V. Prasad, chief currency trader at IndusInd Bank in Mumbai. “Capital and portfolio flows are strong.”
Effect on earnings
Tata Consultancy Services Ltd, the nation’s largest computer-services provider, said the rupee’s “drastic” gains will erode earnings. The Federation of Indian Export Organisations (FIEO) said exporters “will be bankrupt”. The government is counting on shipments to support growth in India, which is expanding at the second-fastest pace among major economies after China.
“Exports are going to be hit by about $7.2 billion a year if the rupee appreciated by 5%, and exporters aren’t earning that much,” Ganesh K. Gupta, president of FIEO said in Mumbai on Monday.
“I think Rs44 per dollar is a realistic value. We are asking the government to intervene.”