Rupee posts biggest gain in 11 years after poll

Rupee posts biggest gain in 11 years after poll
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First Published: Mon, May 18 2009. 05 48 PM IST
Updated: Mon, May 18 2009. 05 48 PM IST
Mumbai: The rupee surged over 3% on Monday, posting its biggest gain in more than a decade on hopes for reforms, foreign inflows and a massive jump in the share market after the ruling coalition swept national polls.
Prime Minister Manmohan Singh’s Congress-led coalition eyed possible new allies and needed just 10 seats for a parliamentary majority, rare in a country used to unwieldy coalitions.
The partially convertible rupee closed at 47.88/90 per dollar, off a high of 47.77, its highest since 26 December 2008.
It ended 3.2 % stronger than Friday’s close of 49.41/42.
The sharp gains pushed the rupee into positive territory for the year. It is up 1.7% from the end of 2008 and is up 9% from a record low of 52.2 touched in early March.
“Tomorrow also equities will be higher, FIIs (foreign institutional investors) are waiting on the sidelines to come in. All factors are clearly favouring the rupee,” said Madhusudan Somani, head of foreign exchange trading at Yes Bank.
“Further appreciation is likely, there is lot of interest from exporters to sell, lot of expectations of FII inflows.”
Stocks rose 17.3% after two brief sessions of trading before triggering circuit breakers that shut the markets early.
It was the biggest rise in stocks since a 20.8% jump on 2 March 1992 when Singh, who was then finance minister, unveiled reforms that opened the economy to foreigners.
Morgan Stanley raised its growth estimate for the fiscal year ending March 2010 to 5.8% from 4.4%, assuming higher private consumption and infrastructure spending.
“There is a strong support for the USD/INR at 47.80, if we break that, then we may go down to 47.55. Range in the short-term looks like 47.50 to 48.50, and look to sell dollars closer to 48.20 on a bounce,” Yes Bank’s Somani said.
One-month offshore non-deliverable forward contracts were quoting at 47.93/48.03, very close to the onshore spot rate.
Volumes in the currency futures market also jumped on account of the high volatility in the spot market with National Stock Exchange and MCX-SX, the two widely used trading platforms, recording a total volume of nearly $2 billion.
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First Published: Mon, May 18 2009. 05 48 PM IST
More Topics: India | Markets | Stocks | Rupee | Elections |