Re Gains Past 45 To Dollar, Ends At 44-Month High Of 44.8650

Mumbai, March 23 | Updated: Mar 24 2004, 05:30am hrs
The rupee gained past the crucial 45 to the dollar mark on Tuesday to end at 44.8650/8750, a new 44-month peak.

The rupees gain by nearly 23 paise is one of the sharpest intra-day gains in recent memory. It also seems to indicate a shift in the Reserve Bank of Indias (RBI) stance on the rupee: by letting it gain rather than defend a level, which is anyway never publicly articulated.

Opening the day at 45.07/09 from its overnight close at 45.0875/0925, the local currency gained past the 45.02/04 level seen at close of trades on July 31, 2000, on the back of robust trade and foreign inflows in the absence of adequate dollar demand from corporates and importers. The nearest to Tuesdays closing was on July 28, 2000 at 44.8750.

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Going by the closing quote, the rupee has gained by 1.1 per cent against the dollar so far in 2004, and by nearly 0.22 per cent last week. These gains come on the back of a 5.2 per cent rise last calendar.

Said Standard Chartered Banks region director-global capital markets, MA Ravikumar: Dollar inflows will continue in the days ahead and it will hit the 44 to the dollar market sometime in the last quarter of this calendar.

Dealers do not read too much into todays rise: just that the usual surrogate purchases of the dollar via state-run banks was not evident. The central bank had been defending the 45.17/18 levels for some time now, but on Monday has let it gain to 45.08 and finally over the 45-dollar level.

The rupee is set to gain more in the next few days on strong inflows from foreign investors who have subscribed to a slew of public offerings by state-run companies.

According to data released by the Securities and Exchange Board of India (Sebi), foreign funds purchases of local shares and debt in March totalled $741 million, taking net investments for the year to over $2 billion. In the preceding calendar, they bought a record $7.8 billion in local assets.

Most senior dealers stuck to the line that Tuesdays gain is nothing but a case of good dollar inflows and sought time before they could make a definitive comment on the chance of any possible shift in the central banks view on the rupee.

Repos outflows had been consistently over the Rs 50,000 crore two weeks back, but have since dropped to a shade over Rs 40,000 crore. One recent cause for the overhang in rupee liquidity is the effect of central bank dollar sterilisation without matching demand for credit. Inflation could be another variable in the whole equation. Inflation fell to 4.91 per cent in the year to March 6, below the peak of 6.21 per cent in January.