Mumbai: The rupee ended stronger at 39.30/31 a dollar on 15 October, on strong capital inflows into equity market amid dollar buying by state-owned banks at the behest of the central bank.
In restricted activity at the Interbank Foreign Exchange (forex) market, the local currency was trapped in a small range of 39.29 and 39.37 after resuming steady at 39.34/36 a dollar from the last close of 39.35/36 a dollar.
The Reserve Bank of India (RBI) was believed to have intervened to cap the rupee’s surge when it touched 39.29 level on the back of a sharp rally in stock market, forex dealers said.
The rupee continued to draw support from heavy flow of foreign liquidity in equity market, which crossed 19K level for the first time ever, notching a gain of 640 points.
The central bank has been buying greenback for the past few days to prevent the domestic currency from appreciating further against the greenback.
The Indian unit has gained more than 12.5 per cent so far this year to become Asia’s best performing currency against the dollar.
Meanwhile, traders said the medium-term outlook for the currency is bullish and it will touch 39 levels in the near future following sustained portfolio inflows. PTI
Mumbai: The rupee was caught on Monday, 15 October, between expectations that foreigners would continue to pour funds into the economy and concerns authorities would take steps to cap the local unit’s gains.
At 9:45am (0415 GMT), the partially convertible rupee was at 39.315/325 a dollar, within striking distance of a nine-and-a-half-year high of 39.27 hit last week after rising from Friday’s finish of 39.36/37.
“The signals are mixed and the market is a little apprehensive about taking large one-way bets at the moment,” said a senior dealer with a private bank.
“I don’t expect to see much volatility today,” added the dealer, who expects the rupee to trade in a 39.30-39.40 range on Monday.
The rupee has gained more than 2.5% since a US rate cut on 18 September sparked a stock market rally that saw the Sensex hit 16 record highs in 17 sessions to Friday.
The index rose more than 1% in early deals on Monday.
The rupee’s gains have been driven by investment flows as foreigners chase attractive returns in the fast-growing economy, and traders said they would watch the stock market for direction.
But the market was also cautious after the finance minister said on Friday that the rupee’s rise had taken it out of the government’s comfort zone, with the prospect of central bank intervention looming.
The Reserve bank of India (RBI) bought $39.9 billion in the first eight months of 2007, according to latest data, and traders say its intervention to contain the rupee has picked up significantly in the last few weeks. Reuters