Bunched up weekend dollar supplies coupled with revived interest of FIIs in the Indian equity market and a weak dollar saw the Indian currency breach the 45 mark, said a dealer at a foreign bank.
The rupee continued its northward trend beyond the 45 levels as Reserve Bank of Indias (RBI) hand was not seen in the forex market to cap the rupee gains. A dealer in a private bank said commerce minister Kamal Naths statement that exporters are not looking for a weak rupee was a clear signal to RBI to allow the rupee to move on its own.
The rupees next target would be to breach the 44.66/67 levels, recorded at the close of trade on May 7, 2004 and some dealers are speculating on this possibility, given the upbeat sentiment of the rupee market, said a dealer.
The month of October saw an estimated $400 million of FII inflows toward an initial public offering (IPO) worth $1.17 billion of public sector power utility firm, National Thermal Power Corporation (NTPC). However, the total FII inflows in October 2004, in equity and debt, aggregated to $438.6 million as FIIs were net sellers in debt. This could be a sign of revival of FII interest in India, said a report India Pulse by ABN Amro Bank.
A hike in the repo rate and a 50 basis point increase in the ceiling on interest rate payable on NRE deposits announced in the credit policy has favoured the sentiment of the rupee, said the report.
Some important developments in the global economy such as scaling of US current account deficit and hike in Chinese interest rates have further pushed up the rupee, said the report.
The report pointed out that some factors would hinder the unsecular rise in rupee, though the medium term is clearly towards appreciation.
Soaring crude oil prices continue to remain a negative factor for the rupee. This, coupled with some steady oil-related corporate dollar demand, is likely to weigh down the rupee, dealers said.