Rupee strengthens on back of rising markets

Rupee strengthens on back of rising markets
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First Published: Mon, Mar 16 2009. 10 34 PM IST
Updated: Mon, Mar 16 2009. 10 34 PM IST
Mumbai: The rupee rose to the highest this month on Monday, on speculation a stock market rally will spur investment in local assets.
The currency strengthened for a second day versus the dollar after the Bombay Stock Exchange’s benchmark index, the Sensex, gained 2.1%, extending the biggest weekly gain in at least a month. The rupee also rose after a gauge that tracks the dollar against six other currencies completed this year’s biggest weekly loss on 13 March, adding to speculation demand is weakening for the US currency.
“There’s more optimism about a revival in portfolio inflows after Asian equities showed a modest recovery last week,” said Arun Kaul, New Delhi-based treasurer at Punjab National Bank, the country’s second biggest state-run lender. “That’s adding support to the rupee.”
The rupee advanced 0.2% to 51.40 to a dollar at close in Mumbai, according to Bloomberg data. That is the strongest since 27 February.
The currency has rebounded 1.5% since reaching a record low of 52.19 on 3 March. It’s still down 5.3% for the year. The currency may trade between 51 and 51.50 in the coming days, Kaul said.
The Sensex advanced 5.2% last week, the most since the five-day period ended 1 February, on optimism the government’s measures to revive economic growth will help boost company earnings.
The index has lost 7.3% so far in 2009 as overseas funds sold $2.3 billion (Rs11,868 crore today) more Indian equities than they bought.
Steel Authority of India Ltd, the country’s second biggest producer, and JSW Steel Ltd forecast higher sales as a $14 billion Union government programme to build houses and roads revives demand.
Offshore contracts indicate traders bet the rupee will trade at 51.58 to the dollar in a month, compared with expectations for a rate of 51.80 on 13 March. 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 trend of broad dollar strength, which we saw in the past several weeks, has waned,” Kaul said. “The rupee is benefiting from that.”
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First Published: Mon, Mar 16 2009. 10 34 PM IST
More Topics: Markets | India | Rupee | Currency | Dollar |