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| Central banks' aid, dollar sales boost rupee |
| BS Reporter / Mumbai Dec 04, 2008, 00:59 IST |
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The rupee On Wednesday gained 0.3 per cent against the dollar to close at 50.01 as investors were bullish across Asia following actions by central banks and banks selling the greenback on behalf of exporters.
 Amid choppy trade in the Indian stock market, banks sold dollars in the second half of the day. On wednesday, foreign institutional investors (FIIs) were net sellers to the tune of $79 million in the equity market, according to the Sebi data, though they are net buyers to the tune of $62.90 million in December so far.
The mood across most Asian markets was upbeat as the Federal Reserve yesterday extended the terms of emergency loan programmes to ease the credit crunch following an interest-rate cut by the Reserve Bank of Australia and a pledge by the Bank of Japan that it would accept lower-grade corporate debt as collateral for loans.
According to Bloomberg data, six of the 10 most-traded Asian currencies outside Japan gained On Wednesday. The rupee, which has dropped around 27 per cent against the dollar since January 2008, gained for the second consecutive day. Yesterday, it fell to a new lifetime low of 50.61 against the dollar before recovering to close at 50.15.
The rupee is under pressure as FIIs, which have been net sellers of equities to the tune of $13.51 billion so far in 2008, are withdrawing funds from emerging markets like India. In addition, the dollar has gained against most currencies globally.
“Exporters sold at different levels in the day, while selling also emerged when the stocks rose earlier in the day On Wednesday,” said a dealer at a foreign bank.
A large engineering company was said to be selling dollars in early trades, but it soon reversed some of these positions to book profits, dealers said. “Exporters sold dollars around 50 as it was a good level for them,” said a dealer with a private bank.
Dollar purchase by importers such as oil companies, however, limited the rise in the Indian currency.
“Importers bought dollars as soon as the rupee rose in early trades On Wednesday,” said a dealer at a brokerage firm.
Forward premiums ended off lows as importers bought forward dollars with the rupee firm in the spot market. The benchmark, one-year forward premium ended at 1.74 per cent compared with 1.78 per cent yesterday. The one-month, rupee-dollar futures contract on the National Stock Exchange and MCX ended higher at 50.24 compared with 50.43 yesterday.
In the overseas non-deliverable forwards (NDF) market, the rupee contracts showed an implied rate of 50.40 to a dollar as against 51.65 yesterday, Bloomberg said. Forwards are agreements, in which assets are bought and sold at current prices for future delivery.
Rupee forwards traded overseas are non-deliverable, meaning they are settled in dollars rather than the local currency.
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