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| Rupee sees biggest day rise since 1986 |
| BS Reporter / Mumbai May 19, 2009, 00:48 IST |
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Gains on expectation of large FII inflows, further rise likely.
The rupee on Monday gained 2.98 per cent against the dollar — the biggest single-day rise in 23 years — in anticipation of large foreign capital flows due to the election verdict in favour of a stable government led by the Congress party.
According to Bloomberg data, the rupee closed at 47.92 against the US dollar, against Friday’s close of 49.40. With the stock markets hitting the upper circuit within a minute of opening, the Indian currency opened stronger at 48.66 against the greenback and hit an intra-day high of 47.77 to a dollar.
With Monday’s gain, the rupee has strengthened by 4.33 per cent since April 29 (see table).
“The anticipation of strong capital flows due to a stable government at centre has led to a situation where the rupee has appreciated,” said Central Bank of India Executive Director Arun Kaul.
R V S Sridhar, senior vice-president, treasury, with Axis Bank said the rupee will show a strong tendency to appreciate against the dollar in the short term. “Short-term positive factors are getting discounted. A lot of people who were long on the dollar on the premise of a hung parliament had to sell the greenback. This gave a push to the rupee,” Sridhar said.
Further appreciation is likely, as there is a lot of interest from exporters to sell, a lot of expectations of FII inflows. “As has been the trend for the past three-four months, the forex market has moved in tandem with movement in the capital market and we expect that to continue,” added a dealer.
The stable government is a positive for the economy. But there are still concerns over rising deficits, as the government spending went right up to tackle the economic slowdown, added others.
The cues from currency futures’ trading indicate a stronger rupee. The volumes in the currency futures market also jumped on account of the high volatility in the spot market in the National Stock Exchange and the MCX-SX, the two widely used platforms.
In all, 10,57,394 contracts were traded on Monday on the NSE platform for currency futures, with a volume of Rs 5,091 cr. The most actively traded currency future contract was the dollar-rupee for May 27, with 9,59,805 contracts (volume of Rs 4,619.35 cr). The last traded price for this contract was Rs 47.93.
One-month offshore non-deliverable forward contracts were quoting at 47.90/48.00. Offshore contracts showed traders pared bets for losses in the rupee. 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.
The forward premium rates eased across the curve. The six-month forward premium was at 2.40 per cent. The dollar was trading at 1.3492 against the Euro, 1.5297 against the pound and 95.82 against the Japanese yen.
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