Mumbai, June 10: The rupee scaled a new two-year high today when it closed at 46.78 against the dollar on the back of plentiful foreign capital inflows.
Its advance beyond the psychological barrier of 46.80 was also supported by the dollar’s weakness overseas. The rupee started the day at 46.88 per dollar.
The increase of nine paise over Monday’s close of 46.89 came amid predictions of further gains in the days ahead, as export earnings and inward remittances pour into the country thick and fast, dealers said.
The arrival of more export income stashed abroad by exporters, stepped up foreign direct investment inflows and a surge in remittances from expatriates have coincided with modest dollar demand from companies and importers, a forex dealer said.
The greenback’s wobbles against most major global currencies also meant the rupee went from strength to strength. The American currency has sunk to new lows against the euro and pound sterling.
The rupee is still undervalued by 2.5 per cent on a trade-weighted basis and there was scope for more gains, bankers said.
The Reserve Bank of India (RBI) fixed the reference rate for the dollar at Rs 46.82, up from Rs 46.90; the euro’s was Rs 54.90, down from 54.82 on Tuesday.
In the forward market, premia on the forward dollar declined on expectations that more greenbacks would come India’s way in the months ahead. Exporters resorted to forward dollar sales, prompted by rupee’s resurgence in the spot segment.
Easy liquidity conditions in the domestic money market also weighed down the premia, dealers said. Call rates dipped to 4.50-4.75 per cent in the overnight money as enough cash swirled about the system.
The six-month forward dollar premium — the rate widely used as a benchmark — closed at 46-45 paise, down from its previous close of 52-51 paise. These deals are supposed to be squared off in November.