The Indian rupee rose to near seven-week high against the US dollar on Monday.
The currency has been appreciating in the wake of strong foreign portfolio flows?$3.5 billion came in during July?as also expectations that foreign investors will continue to invest in India, given the potential for growth dealers said.
The partially convertible rupee appreciated 0.1% to 46.1275 against the greenback as of the 5 pmclose in Mumbai, the highest since June 21.
The currency has risen 1.3% in the past month (July). Said Ashish Baruah, a forex dealer from IndusInd bank, ?With a projected GDP growth of 8.5%, India augurs well as an Investment destination. The local unit may appreciate in the near term with a support at 45.75. However, heavy buying by importers may put up some resistance to rupee?s rise.?
The rupee hit a high at 46.02 but pared some of its gains after the oil companies were seen buying the dollar to square off their short positions. Rupee?s intra-day low was at 46.15.
Experts point out that, in a rising interest rate scenario, global investors find Indian assets more attractive since they can borrow money in the Euro zone and the US, at a relatively lower cost of funds and invest in high yielding assets in India.
As per the Bloomberg data, the global funds on August 5 bought more Indian shares than they sold for a 23rd day, the longest run of net purchases since the agency began tracking the data at the end of 1998. They pumped in $4.3 billion in that time, lifting their holdings to $83.8 billion, Securities & Exchange Board of India data showed.
?The India growth story is strong and the increase in interest rates is helping rupee appreciation,? said Vikas Babu, a currency trader at state-owned Andhra Bank in Mumbai. ?We have received a very good amount of fund flows in the past month.?
In a recent interview to FE, Jamal Mecklai, of Mecklai and Mecklai, said that while he had held till recently been holding on to a range of 45.50 to 48.50 over the next six months, he now felt there was greater risk on the downside.
?I would now suggest a range of 45.50 to 50 over the next six months.? Mecklai said adding that with global risk appetite still low, inflows are relatively modest. On the other hand, the fact that our monthly trade deficit is at a high of $10 billion, suggests that there could be continuing pressure on the rupee. This is also probably why the NDF market is discounting a much weaker rupee.