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| World Home » Business » | Thu. Aug 28, 2008 |
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Rupee Rose to New Nine-Year High MIL/Agencies, Sep 20, 2007. Mumbai, September 20, 2007- Rupee is reported to have risen to a new nine-year high of 40.18 levels, buoyed by foreign inflows and a booming local stock market. This was the rupee’s strongest close since May 1998. The local currency, which had ended at 40.48 levels a day ago, rose sharply on Wednesday following the 50 basis point cut announced by the US Federal Reserve. The Fed’s action prompted foreign investors to pull out funds from the US and invest in emerging markets, prominent ones being India and China. However, there was a significant intervention from the Reserve Bank of India, which prompted the rupee to end a tad weaker at 40.20/21 levels against the dollar. Earlier this year, the rupee had touched 40.20 levels per dollar in July. While both banks and corporates were seen buying dollars, exporters were struck by panic and were seen selling the greenback. According to a senior treasury manager with a private sector bank, the only deterrent which could come in the way of a strengthening rupee could be the rising crude prices as they could impact import commitments Going forward, treasury officials are extremely bullish that the rupee will breach the 40-mark versus the dollar, even as RBI is likely to intervene strongly to protect export competitiveness. The rising rupee was accompanied by a sharp rise in the premia on forward contracts. The yield on the one-month contract rose to 2.54% (2.19%), while that on the six-month premia ended at 2.10% (1.76%). While the one-year premia closed at 2.07% (1.82%). The Fed’s decision also led to a sharp rally in bond prices. While prices of government bonds rose by nearly 40 paise, prices of short-term corporate bonds rose much more. However, the rally was seen more on the shorter-end.
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