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| World Home » Business » | Thu. Nov 20, 2008 |
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Rupee at 8-yr high on tight cash MIL/Agencies/ET, Apr 4, 2007. Mumbai, April 4, 2007 - Rupee climbed to its highest level in nearly eight years on Wednesday, breaching 43 to a dollar as banks sold the US unit to raise funds to meet statutory reserve requirements. According to Economictimes, at 10:15 am, the rupee was at 42.925/935 per dollar, off an early high of 42.84, its strongest since June 1, 1999, when it traded at 42.83, according to Reuters data. The rupee ended at 43.065/075 on Tuesday. "With cash in the system remaining so tight, the market was expecting the rupee to go past 43 today," said a dealer with a private bank. "And it's becoming evident that the RBI no longer considers any particular level sacrosanct," the dealer added. The RBI is suspected of having sold rupees regularly since November to thwart its rise. The local currency has gained about 9.5 per cent since hitting a three-year low last July, and the central bank is thought to be uneasy with the rupee's pace of appreciation. Still, the RBI's recent intervention has fuelled money supply growth and inflation, both running above the central bank's comfort band. In a bid to tame inflation and credit growth, the RBI has increased the Repo Rate and the Cash Reserve Ratio. Traders said the move had compelled banks to sell dollars to generate funds to meet the statutory requirement. Overnight inter-bank loan rates traded at 9-10 per cent, above 6-7 per cent when cash supplies are adequate. The rates had hit 80 per cent on Friday, their highest in more than a decade.
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