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| Re trades near two-month high |
| BS Reporter / Mumbai May 08, 2009, 00:10 IST |
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Buoyed by stock market sentiments and the return of foreign institutional investors (FIIs) to the Indian equity markets, the rupee today climbed to its highest level since February 16.
With the stock markets in positive territory since morning, the rupee opened stronger against the US dollar at 49.30, as against yesterday’s close of 49.65. During the day, it gained to reach a high of 49.23 but weakened a little towards the end of trading to close at 49.26 against the dollar, according to Bloomberg data.
Dealers such as State Bank of Travancore’s V Kumar said that a lot of import covering took place when the rupee was around 49.20 against the dollar. Besides, he said, there was an extent of export cancellation by companies which had booked dollars around the 50-levels. Companies and dealers had expected the rupee to hover around the 50-mark against the dollar for a while.
Rafique Ahmed, Chairman of Farida Shoes, which sells leather goods and footwear to global retail chains, said that his company had booked shipments assuming the rupee would hover around the 50-mark against the dollar.
“We had also taken currency positions around those levels. If the trend (appreciation) continues, we will have to rework our positions. But if there is a fractured mandate in the elections, then the rupee will weaken again,” he said.
So far this quarter, the rupee has gained by around 3 per cent.
After falling yesterday – when the rupee also weakened by 35 paise against the dollar – the equity markets gained today. The Bombay Stock Exchange Sensitive Index (Sensex) closed 1.37 per cent higher, while the broader National Stock Exchange Nifty gained 1.62 per cent today.
The stock markets rose on expectation of fewer worries from the bank stress tests in the US and also on speculation better-than-estimated economic data from the US and Australia will temper risk aversion among global investors.
The currency climbed for a third day this week as a rally in Asian equities added to optimism that demand is increasing for emerging-market assets. FIIs bought more Indian shares than they sold on 17 of the last 19 trading days, stock-exchange data show. Most Asian currencies also gained against the US dollar.
Offshore contracts show traders are betting the rupee will drop to 49.34 in a month, compared with expectations for a rate of 49.67 yesterday.
Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.
In the futures market, on the NSE, the one-month contract ended at 49.34 a dollar today, as against 49.73 yesterday. Similarly, on the MCX, the one-month contract closed at 49.34 against yesterday’s close of 49.74 a dollar.
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