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Rupee retreats from 7-month high as dollar rises vs majors

Rupee retreats from 7-month high as dollar rises vs majors
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First Published: Wed, Jun 03 2009. 05 28 PM IST
Updated: Wed, Jun 03 2009. 05 28 PM IST
Mumbai: The rupee retreated from seven-month peak on Wednesday after the dollar rose on comments from Asian monetary sources that they would keep buying US debt even if the credit rating of the United States was downgraded.
Dealers said a choppy share market and some dollar demand from oil refiners also weighed on the rupee.
Sources told Reuters that Asia’s biggest central banks believed that even if a US ratings cut were to occur, it would not cause China, Japan, India and South Korea to change their reserves policies because there are no alternatives to the liquidity afforded by the dollar.
The partially convertible rupee closed at Rs47.07/08 per dollar, 0.1% weaker than its previous close of Rs47.02/03. The rupee rose as high as Rs46.75 during trade, its strongest since 5 November.
“The market was overtly bullish on non-dollar currencies, and there was too much of one-way movement, but suddenly the market realised the information is already discounted and so this correction,” said Agam Gupta, head of foreign exchange trading at Standard Chartered Bank.
“The rupee is likely to move further up, but there could be a temporary move downwards before that,” he added.
India’s main stock index climbed above 15,000 points on Wednesday for the first time in nine months, but was beaten back as investors cashed in profits after a three-month rally.
Since early March, the rupee has gained nearly 11% from its all-time low of Rs52.2, reached in early March. Foreign fund inflows into local shares have been a key factor for the rally.
Foreign investors have bought a net $4.6 billion worth of stocks in 2009, a sharp reversal from record outflows of more than $13 billion seen last year. The rupee lost about a fifth of its value in 2008.
Traders said the rupee was expected to appreciate further from current levels, but dollar buying intervention by the central bank was likely to slow the pace of rise.
One-month offshore non-deliverable forward contracts were quoted at 46.92/47.02, stronger than the onshore spot rate, suggesting a positive bias in the near term.
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First Published: Wed, Jun 03 2009. 05 28 PM IST
More Topics: India | Rupee | Currency | Dollar | Foreign Exchange |