The Indian rupee on Monday closed at its highest exchange rate against the dollar recorded in the past 18 months. The sharp increase in the value of the Indian currency beyond the 45 rupee to a dollar rate was pushed by rising demand from foreign investors putting money in the stock markets and elsewhere in the economy.
The local unit ended at 44.97 against the dollar. It hit an intra-day high of 44.94, travelling up from 45.28 at the opening. On September 9, 2008, just before the Lehman Brothers bankruptcy, it had touched 44.82. Forex dealers like Ananth Narayan, managing director and head of forex & rates, Standard Chartered Bank, said he expected the rupee to touch 42 to a dollar by December, 2010. ?We have seen increased inflows of foreign capital into India causing the rupee to hit a fresh high. With the current pace of global economic recovery, capital inflows will continue to pour into India.?
Dealers also said some custodian foreign banks were also selling the dollar to support their clients? inward remittances to fund their expansion plans. The rupee trend could however run up against a strenghthening US dollar if concerns over the fiscal crisis in Greece and even Portugal deepen.
In Monday?s trade, the euro rose to 1.3500/$1 against 1.33 quoted last Friday while the sterling climbed to 1.5019/$1 compared with 1.4860 quoted on Friday.
?We have also seen the euro strengthening on short covering as IMF and European nations have come to rescue Greece. We may witness a level of 44.76 in the short term as the dollar looks weak on technicals,? mentioned a note by Asit C Mehta Investments.
Meanwhile, exporters are expected to hedge their currency risk to mitigate rupee appreciation.
?Supported by India?s growth story, the rupee will continue to rise. With premium on forwards hovering around 3.25%, it is an opportunity for exporters who have not hedged earlier to hedge their receivables instead of keeping their position open,? said KN Dey, director, Basix Forex & Financials.