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Rupee breaches 40-mark, strengthens to 39.95/$
BS Reporter / Mumbai September 20, 2007
The rupee appreciated strongly against US currency in morning trades today to rule past 40/$ first time in more than nine years as overseas investors pumped funds in Indian capital market to get high yields.

After the cut in US interest rates the outlook for assets like the Indian currency has increased and foreign investors have made heavy purchases in Indian equity, a forex dealer with the public sector bank said.

The rupee was ruling at 40.1418 yesterday on out of market trades yesterday after closing at 40.20/$, he said.

According to data available on Clearing Corporation of India website the partially convertible rupee was at 39.95/$ after having strengthened to as much as 39.88/$ - a level it last traded in May 1998 - before giving up some of its gains.

The market was underpinned by expectations for higher capital flows into record-setting stocks. The foreign banks which are flush with US currency have sold dollar in market to buy rupee assets, dealer said.

 
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rythm_g September 20 , 2007 ,11:57 IST
FII's have to give only 10% of the amount befor allotment. That means only 4B $ was kept upfront. Even the dollars will be converted only after allotment and that means still 4B $ is not present in the system yet.. Massive intervention by RBI and sterilisation by issue of bonds: Its being done generally in order to absorb excess rupee because of dollar conversion.. That can partially cure rupee strength.
Reply
altafrahman September 20 , 2007 ,11:30 IST
I thought this rise in Re value is due to PGCIL IPO subscription by FIIs. I read some where that nearly 40B$ entered the country during this issue. FII portion is oversubscribed 75 times. Meaning more than 90% will go back once allotments are finalized. I hope PGCIL finalizes allotments quickly to kick out surplus FC. RBI should stop FII from subscribing in IPOs and FPOs. They are rich. Let them buy in secondary market.
Reply
shrirr September 20 , 2007 ,11:06 IST
What will we see now? Massive intervention by RBI and sterilisation by issue of bonds? More FII & FDI funds will flow in, Rupee will strengthen against $ & settle at 39.00 - 39.40 in the short term - this will also slightly reduce the liabilities of the Petroleum Majors who are bleeding daily. How will GOI balance the problems faced by the exporters and also keep the Rupee steady? Million $ question and the country hopes that GOI has an answer!
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