Rupee strengthens second day in a row on positive Sensex cues

Rupee strengthens second day in a row on positive Sensex cues
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First Published: Thu, Nov 05 2009. 08 52 PM IST

Gaining: The currency rose 0.1% to 47.03 per dollar on Thursday. Rajkumar / Mint
Gaining: The currency rose 0.1% to 47.03 per dollar on Thursday. Rajkumar / Mint
Updated: Thu, Nov 05 2009. 08 52 PM IST
Mumbai: The rupee strengthened for a second day on Thursday as stock gains added to optimism that foreigners are increasing purchases of the nation’s assets to gain from its relatively fast economic growth.
Gaining: The currency rose 0.1% to 47.03 per dollar on Thursday. Rajkumar / Mint
The currency advanced to its strongest level this week after the Bombay Stock Exchange’s benchmark sensitive index climbed 1%, extending Wednesday’s 3.3% gain.
Overseas funds added to their holdings of Indian shares in each of the last eight weeks, taking net purchases for the year to $14.2 billion (Rs66,882 crore today) on 3 November.
“The rupee strengthened later in the day following gains in the stock market, which spurred speculation that capital inflows will increase,” said Sanjay Arya, a treasurer at state-owned Bank of Maharashtra in Mumbai.
The currency rose 0.1% to 47.03 per dollar at close, according to data compiled by Bloomberg. That increased the Indian unit’s gains this year to 3.7%, the fourth best performance among Asian currencies.
Offshore contracts indicate bets the rupee will trade at 47.06 to the dollar in a month, compared with expectations of 47.11 at the end of last week. Forwards are agreements in which assets are bought and sold at current prices for future delivery.
Non-deliverable contracts are settled in dollars rather than the local currency.
The rupee fell earlier on speculation the nation’s refiners increased dollar purchases to pay for costlier crude oil imports. Oil prices in New York have gained almost 4% this week, extending October’s 9% advance, the biggest since May. India imports more than three-quarters of the oil it uses.
The rupee opened weaker “as oil steadily advances, adding pressure on India’s trade deficit to widen”, said Vikas Babu, a trader at state-owned Andhra Bank in Mumbai.
Crude oil has advanced over 79% this year, boosting India’s oil import costs to a 10-month high of $6.34 billion in September.
India’s trade shortfall increased to $7.8 billion in September, from $2.2 billion in February, government data showed.
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First Published: Thu, Nov 05 2009. 08 52 PM IST
More Topics: Markets | India | Rupee | Dollar | FIIs |