Mumbai: The Indian rupee may rise sharply at the open on 23 January to around 39.30 per dollar, with traders saying the U.S. Federal Reserve’s 75 basis point cut in interest rates could encourage capital inflows into India.
The partially convertible rupee ended at 39.48/49 per dollar on 22 January, above 21 January’s close of 39.555/565 and well off an intraday low of 39.78, which was the weakest since 29 November, Reuters data showed.
Asian share markets rallied following the Fed cut, with Hong Kong jumping 7% on 23 January after the Federal Reserve’s biggest interest rate cut in over two decades tempted investors to lap up beaten-down stocks.
Indian shares plunged nearly 13% during trade on 22 January before closing down 5%, a seventh successive fall. Data shows in the four days to 21 January, foreigners sold $2 billion of Indian stocks.
Capital inflows have been a key driver of the rupee’s gains in 2007, and the foreign selling removed a key support.