Inflows take Re higher to 39.31

The spot rupee touched a new nine-year high of 39.31/3150 at close today following heavy foreign fund inflows into the equity market.

"While the market has received foreign exchange inflows of $700-800 million, the RBI purchased dollars to curb the rupee appreciation. Or else, the spot rupee exchange rate could have breached the crucial barrier of 39.00," said a dealer with a PSU bank.

The spot rupee opened strong at 39.34/36 against Tuesday's closing of 39.44/45 to a dollar and gained further on rising foreign fund inflows.

"The spot rupee may continue to rule higher till this week owing to inflows. However, the stock market is overdue for a correction as the Sensex has peaked. This could bring back the spot rupee to 39.85-40.00 to a dollar by end of the month", said a dealer with emecklai.

On the other hand, oil importers were seen covering up their import payments which pushed up the premium to be paid for booking dollars for future (forward dollars).

Dealers explained that since most banks have booked dollars for a future date anticipating a dollar shortage in the international market, the supply in forward dollars is falling short of demand. The current supply of dollars is in the spot market, therefore the premiums on forwards have gone up sharply.

The annualised premium for six-month and one-year forward dollars closed at 1.36 per cent and 1.40 per cent against 1.00 per cent and 1.01 per cent on Tuesday.

Meanwhile, the RBI announced a cutoff yield of 6.58 per cent and 7.37 per cent for the 91-day and 364-day treasury bills against 7.14 per cent and 7.52 per cent in the previous auctions.

This triggered a brisk trading in government bonds. The yield on the benchmark 10-year closed at 7.90 per cent against 7.92 per cent on Tuesday.