Mumbai: The Indian rupee shot to a nine year peak on 24 September, as dealers bet foreign investors would continue pouring funds into the record-setting stock market, though suspected central bank intervention capped gains.
At 9:45 a.m. (0415 GMT), the partially convertible rupee was at 39.81/82 per dollar, a level it last traded in May 1998, up from the close of 39.90/91 on 21 September.
“It’s a strong one way movement today, with flows into the stock market expected to be strong,” said a dealer with a state-run bank. “The central bank is in around 39.82 but the market is selling dollars comfortably to them,” the dealer added.
Foreign funds moved more than $1 billion (Rs3,983 crore) into Indian shares over two days, after a sharp U.S. rate cut sparked interest in emerging market assets. The rupee has appreciated more than 11% this year.
Indian shares climbed to an all-time high early on 24 September, stretching a record-setting rise to a fourth session and raising hopes for more foreign inflows.
The dollar dipped to a 15-year low against a basket of currencies and hovered near a record low against the euro as investors shrugged off more gripes about the single currency’s strength.
Dealers also said there was a resumption of the carry trades where investors, spurred by last week’s hefty Fed rate cut, sold low yielding currencies in favour of high yielding assets like the rupee.
Reserve Bank of India Governor Yaga Venugopal Reddy said on 23 September the U.S. rate cut was a “relevant input” for India’s central bank, but domestic factors still outweighed global ones.