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Re touches 8-year high on expectations of more

Re touches 8-year high on expectations of more
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First Published: Wed, Apr 11 2007. 12 24 AM IST
Updated: Wed, Apr 11 2007. 12 24 AM IST
Mumbai: India’s rupee advanced for a third day to reach an eight-year high on speculation that overseas investors are pumping in money as the government aims to sustain the fastest rate of economic growth in two decades.
The currency has advanced 1.5% this month, adding to three quarters of gains through March, as approved foreign direct investment jumped seven times to $2 billion (Rs8,600 crore) last quarter.
Demand for the rupee may increase as the benchmark stock index rebounded from a slump last week, suggesting that funds abroad are returning to Indian assets.
“The dollar flows coming in are good and we aren’t going to see the strength in the currency give way unless there’s a sustained move to push it back,” said L.V. Prasad, chief currency trader at IndusInd Bank Ltd in Mumbai.
The rupee rose 0.1% to 42.845 against the dollar at the 5pm close of trading on 10 April in Mumbai, according to Bloomberg data.
The currency reached 42.70 on 9 April, the strongest since May 1999. It hasn’t breached 42.00 to the dollar since May 1998. Prasad didn’t provide a forecast.
India’s rupee is the third-best performer among 15 of the most-actively traded currencies in the Asia-Pacific region over the past month.
The Bombay Stock Exchange Sensitive Index, or Sensex, on 9 April climbed the most in two weeks.
Global funds bought $129 million more Indian shares than they sold on 5 April, ending three days of net sales, according to market regulator Securities and Exchange Board of India.
On Monday (9 April), the government approved foreign direct investment proposals of $Rs473 crore, including a plan by Citigroup Inc. to buy a 2% stake in India’s National Stock Exchange, the finance ministry said in a statement.
The rupee may not keep recent gains as the central bank will sell the currency to prevent gains from hurting exporters, according to Rajeev Malik, a Singapore-based economist at JPMorgan Chase & Co. Growth in shipment of goods and services from the country slowed to below 10% in the three months through February, the least in more than three years.
“The deceleration in non-oil exports hints that further strengthening could be counter-productive,” he said. “The rupee’s gain will be short-lived.”
The currency may weaken 5.87% to 45.33 against the dollar in three months, forwards market show. Forwards are agreements in which assets are bought and sold at current prices for future delivery.
A stronger rupee makes exports less competitive overseas while making imports cheaper, helping widen the trade deficit.
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First Published: Wed, Apr 11 2007. 12 24 AM IST
More Topics: Money Matters | Currency |