Rupee breaches Rs44/dollar, highest in 25-months

Rupee breaches Rs44/dollar, highest in 25-months

Mumbai: The Indian rupee surged to its highest level since late August 2008 on Friday, buoyed by record foreign portfolio investment and a shaky dollar globally.

At 1:45pm, the partially convertible rupee was at Rs43.95/96 per dollar, its highest since 29 August, 2008 and above its previous close of Rs44.11/12 on Thursday.

At 11:26am, the partially convertible rupee was at Rs44.0525/0550 per dollar, after rising to Rs44.02, its highest since 1 September, 2008. It had ended at 44.11/12 per dollar on Thursday.

“There is a lot of inflow happening and if the rupee rises more than 44, then it could rally to 43.85 levels," said a forex trader at a large state-run bank.

The rupee had fallen to 44.25% in early deals taking cues from choppy domestic shares.

Shares flip-flopped in early trade on Friday, but skidded lower as investors booked profits ahead of an up to $3.5 billion initial public offering by state-owned Coal India next week that is expected to draw funds away from the market.

Traders said they will also closely watch the central bank, which had bought dollars to stem the rupee’s strength on Thursday -- the move which they believe was the first intervention this year.

Record buying of domestic stocks by foreign funds has been the main driver for the rupee in recent weeks, and the inflows are expected to rise when Coal India opens its IPO on Monday.

The world’s largest coal miner plans to raise up to $3.5 billion in country’s biggest IPO, and fund inflows towards this could push the rupee up to 43.50 and force further intervention, dealers said.

Other state-run firms planning big share sales include Power Grid Corp and Steel Authority of India.

For the year to date, the rupee is up 5.6% on record $22.5 billion foreign fund inflows into shares.

Oil is India’s biggest import and refiners are the largest buyers of dollars in the domestic currency market. Oil was steady on Friday, heading for a third straight weekly close above $80 per barrel, as hopes for economic stimulus ahead of a speech by the US Fed chief Ben Bernanke countered soft demand in top consumer, the United States.

Dealers were awaiting inflation data due around noon for cues on the central bank’s stance ahead of its 2 November policy review.

India’s wholesale price index (WPI) in September probably rose 8.5% from a year earlier, unchanged from its rise in August. Forecasts from 20 economists ranged from 8% to 8.7%.

One-month offshore non-deliverable forward contracts were quoted at Rs44.32, weaker than the onshore spot rate.

In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, MCX-SX and United Stock Exchange were all at 44.1625, with the total traded volume on the three exchanges was a low $2 billion.