×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Rupee slumps on speculation, RBI to sell currency

Rupee slumps on speculation, RBI to sell currency
Comment E-mail Print Share
First Published: Thu, Mar 22 2007. 02 06 PM IST
Updated: Thu, Mar 22 2007. 02 06 PM IST
By Anoop Agrawal, Bloomberg
Mumbai: Rupee slumped the most in almost three weeks on speculation the central bank will sell the currency after it reached a 19-month high yesterday.
The Reserve Bank of India (RBI) has repeatedly said excessive volatility in the currency is undesirable, though it doesn’t have an exchange-rate target. The rupee snapped five days of gains on concern that a 1.3 % rally this month will prompt the central bank to act in the market to protect exporters, whose overseas shipments of goods account for 10 % of the economy.
“The rise in the rupee has heightened speculation of the central bank doing something,” said M.A. Sardesai, treasurer at state-owned Bank of Maharashtra in Mumbai. “It may have to intervene to help exporters.”
India’s currency fell by 0.5 % to 43.68 to the dollar. Sardesai didn’t provide a forecast. The rupee in March is the third-best performer among the 15 most-actively traded currencies in the Asia-Pacific region.
The country’s foreign-exchange reserves rose by $50.49 billion over the past year through 9 March to $194.41 billion, the central bank said on 16 March.
Prime Minister Manmohan Singh’s government is aiming to increase exports by 20 % in the year ending 31 March to boost industrial growth and accelerate economic expansion.
Exports from India rose by 25 % to $101 billion in the year ended 31 March 2006, exceeding the government’s target of $92 billion.
Singh aims to increase overseas sales to $165 billion by 31 March 2010, boosting India’s share of global merchandise trade to 1 % from the current 0.8 %.
Investor Inflows
Rupee may still be supported by foreign inflows into the nation’s stocks as investors seek to benefit from economic growth that is the second-fastest among major economies in the world after China.
The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, gained for the past four days, the longest stretch since December.
Overseas fund managers bought $1.08 billion more of Indian stocks than they sold this year through 21 March, according to the Securities & Exchange Board of India (SEBI), the stock market regulator.
“The rupee may resume its rising trend because the flows will remain strong,” said L.V. Prasad, chief currency trader at IndusInd Bank in Mumbai. “The undertone is still in favour of the rupee.”
The rupee may still fall on speculation importers, needing dollars to pay for overseas purchases, will take advantage of the currency’s rally to save on foreign-exchange costs.
“Its certainly an opportunity for importers since we see such kind of appreciation quite rarely,” Bank of Maharashtra’s Sardesai said.
Comment E-mail Print Share
First Published: Thu, Mar 22 2007. 02 06 PM IST
More Topics: Money Matters | Bonds |