Rising stock markets push rupee up

March 16, 2009 by Prakash Dhawan
Filed under: Uncategorized 

Rupee today gained 12 paise against the US dollar to close at 51.40, the highest level this month, mainly due to the rise in the stock market indices over the last two trading sessions. The greenback weakened against most other currencies too across the globe.Both the Bombay Stock Exchange’s Sensex and National Stock Exchange’s Nifty recorded a 2.1 per cent rise today after gaining 5 per cent on Friday. What added to the sentiments was the rise in most Asian stock market indices.

“The rise in the stock markets has provided some breather to the rupee. Though importers continue to be jittery, there is a temporary respite for them and they are not buying dollar significantly,” said a forex dealer at a large public sector bank. An executive at another public sector bank said that the rupee weakened later in the day on corporate buying of the greenback to the tune of $200-300 million. The Indian currency hit a low of 51.70 in intra-day trade, but recovered on sale of the greenback by importers.

Dealers, however, said that they expected the rupee to weaken in the coming months. According to Bloomberg, offshore contracts indicate traders bet the rupee will trade at 51.58 to the dollar in a month, compared with expectations of a rate of 51.80 on March 13. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency. Futures contracts on NSE and MCX ended down, tracking the movement in spot market.

The one-month contract ended at 51.47 a dollar, compared with 51.63 on Friday. The rupee has gained 1.5 per cent since it touched a record low of 52.18 against the dollar on March 3. However, it has fallen 5.3 per cent so far in 2009. In the latest round of depreciation, triggered by a Standard and Poor’s revision of India’s sovereign rating outlook from stable to negative, the Reserve Bank of India has restricted its intervention in the market, fearing that it would suck out rupee liquidity if it sold dollars to prop up the Indian currency.

According to the latest data released by the central bank today, between April 2008 and January 2009, it has sold $31.76 billion (Rs 1,61,100 crore) to check a steep depreciation of the rupee against the US currency.

Tags: , , ,

Comments

Tell me what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!

You must be logged in to post a comment.