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Rupee advances a 3rd week as growth fuels investment

Rupee advances a 3rd week as growth fuels investment
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First Published: Fri, Jun 01 2007. 11 50 PM IST
Updated: Fri, Jun 01 2007. 11 50 PM IST
By Sam Nagarajan/Bloomberg
New Delhi: The rupee advanced a third week on speculation investment from abroad will increase as India’s economy expanded at the fastest pace in almost two decades.
Capital inflows are likely to rise in coming weeks as companies including ICICI Bank Ltd, India’s biggest lender by market value, sell shares, helping the rupee to rise more than 9% this year. The currency on 30 May dropped from a nine-year high on speculation the central bank is selling it to stem gains and protect exporters’ earnings.
“Things are different today as the flows we are seeing aren’t just speculative, but long-term in nature,” said L.V. Prasad, chief currency trader at IndusInd Bank Ltd in Mumbai. “The central bank has been intervening, but with so much pressure on the rupee to strengthen, I’m not sure how long they can hold it.”
India’s currency gained 0.1% this week to 40.55 against the dollar, according to data compiled by Bloomberg. It climbed as high as 40.285 on 28 May, the strongest since the same month in 1998.
The rupee has failed to breach 40.50 for the second time this week on speculation of central bank intervention as a government report on 1 June 2007 showed the country’s trade deficit widened to a record $7.06 billion in April.
Gross domestic product grew 9.4% in the fiscal year to 31 March, the fastest pace since 1989, the Central Statistical Organisation said in a report on Thursday. The central bank estimates growth of “around 8.5%” in the current year. The rupee has risen in all of the past 13 weeks but one, and is the best performer this year among the 16 most-active currencies in the Asia-Pacific region, Bloomberg data show.
DLF Ltd, a Delhi-based real estate developer, last month said it plans to raise as much as Rs9,630 crore($2.4 billion)from a share sale due to begin on 11 June. Overseas investors will buy a portion of the shares. ICICI plans to sell Rs17,500 crore of shares in India’s biggest offering.
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First Published: Fri, Jun 01 2007. 11 50 PM IST
More Topics: Money Matters | Currency |