Rupee hits 5-yr high on yuan talk

The rupee rose to a five-and-a-half year high against the dollar today on fresh speculation about an immediate Chinese yuan revaluation.

The Indian currency rose to a high of 43.26 per dollar, piercing its previous five-year intra-day high of 43.30 in February.

The spot rupee witnessed a 16 paise appreciation during the day to close at 43.28. This is the rupee's strongest closing rate since December 1999, when it closed at 43.30 to a dollar.

The revaluation rumours had their impact on the government securities market as well. With hopes of increasing liquidity following the rupee's appreciation, the prices of long- and medium-term paper moved up by 20-25 paise after opening lower following the Reserve Bank of India's (RBI's) auction of state development loans.

"Irrespective of the Chinese revaluation, the rupee is expected to remain bullish on the back of inflows -- not necessarily portfolio investment but trade inflows as well," said K Jayaraman, head of foreign exchange, Ceylon Bank.

"The markets are confident that a revaluation is on the cards. The market reaction is factoring this in. By the time it actually happens, the market will not offer a knee-jerk reaction," said Partha Mukherjee, head of treasury at UTI Bank.