The Telegraph
Since 1st March, 1999
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Rupee scales 34-month peak

Mumbai, Aug. 7: Breaching the psychological $46 barrier, the rupee spurted to an over 34-month closing peak of 45.95/96 per dollar today, propelled by robust trade and capital inflows in the absence of adequate demand from companies and importers.

Extending gains for the fourth straight session, the rupee rose by 10 paise from overnight closing levels of 46.05/06 in hyper-volatile trade at the inter-bank foreign exchange market, dominated mostly by dollar sellers, dealers said.

Robust trade and investment inflows mainly contributed to the rupee’s strength, which was further augmented by firms, bringing in cheap funds borrowed abroad, amid a relatively weak dollar overseas, they added.

“Strong trade and capital inflows continued to drive the rupee to new highs, largely helped by the absence of central bank intervention through state-run banks’ dollar purchases,” a dealer said. “Surrogate intervention by the apex bank contained the rupee’s rise in the recent past,” he said.

State-owned banks buy dollars on behalf of the Reserve Bank of India (RBI) to check sharp rupee gains and prevent excessive speculation and volatility in the currency markets.

The RBI fixed the reference rate for the US currency at Rs 46.02 per dollar and the single European unit at Rs 52.10 per euro from Rs 46.08 and Rs 52.57 respectively yesterday.

Traders expect the rupee to consolidate further tomorrow, but fears of RBI intervention, through state-run banks would put a solid lid on its rise.

The rupee has appreciated by over 4 per cent in the current calendar year and is fairly valued on a trade-weighted basis against the dollar, given the greenback’s relative weakness against other major and regional currencies.

Rupee premiums on the forward dollar ended lower, tracking the strong spot rupee/dollar exchange rate, in spite of late paying pressure.

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