Rupee holds near 2-week high as funds step up equity buys

Rupee holds near 2-week high as funds step up equity buys
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First Published: Tue, Jan 01 2008. 11 17 PM IST
Updated: Tue, Jan 01 2008. 11 17 PM IST
Mumbai: The rupee held near a two-week high as overseas investors increased equity purchases to benefit from the benchmark Sensex index’s six-year winning streak.
The currency held gains after completing the best year since at least 1974 as funds based abroad bought $1.2 billion (Rs4,728 crore) more of local shares than they sold last week, the most since the five-day period ended 12 October, according to the Securities and Exchange Board of India.
Global money managers bought local equities worth a record $17.4 billion in 2007.
“The rupee may continue to appreciate as India’s economic growth and stock market gains attract capital inflows,” said Ravindra Babu, a Mumbai-based currency trader at the state-owned Andhra Bank. “The overall balance of payments trend is also positive for the rupee.”
The rupee traded little changed at 39.42 against the dollar from Monday as of the 5pm close in Mumbai, according to data compiled by Bloomberg.
The rupee was the best performer in Asia, after the Philippine peso, last year, having risen 12.3%.
The currency may climb as high as 38.2 by the end of March, Babu said.
The median estimate of 24 economists and strategists in a Bloomberg survey is for the rupee to advance to 39 by the end of March.
The rupee’s appreciation may be limited by concern the country would need more dollars to finance a widening current account deficit. A central bank report yesterday showed the gap increased more than expected.
“The rupee’s appreciation is likely to be slowed by the external deficits,” Siddhartha Bhotika, Mumbai-based currency economist at ICICI Bank Ltd, said in a Monday research note. “Trade deficits could be exacerbated if emerging Asia slows down along with the US economy.”
The worst housing slump in 16 years may crimp growth in the world’s biggest economy to less than 2% next quarter, economists predicted in a Bloomberg survey.
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First Published: Tue, Jan 01 2008. 11 17 PM IST
More Topics: Rupee | Sensex | Equity | Money Matters | Currency |