Rupee rises to seven-week high on foreign inflows

Rupee rises to seven-week high on foreign inflows
Business Standard, April 14, 2009, Page 3, Section II

BS Reporter / Mumbai

The rupee appreciated to a seven-week high against the US dollar on flow of funds from foreign institutional investors (FIIs) and exporters.

After touching 49.8225, its highest since February 25, the Indian currency closed at 49.89 against the greenback as against Thursday’s close of 50.04, according to Bloomberg data. The market was closed on Friday.

Dealers said that the rupee gained in strength because of the money that FIIs have invested during the current stock market rally on speculation that government stimulus packages will break a global recession that drove funds from emerging markets. So far in April, foreign funds have invested $416 million in the Indian equity markets.

The Bombay Stock Exchange Sensitive Index, or Sensex, and the National Stock Exchange S&P CNX Nifty ended Monday’s session up 1.51 per cent and 1.21 per cent respectively. Since the end of February, the Sensex alone has seen a rise of 23 per cent.

Dealers also attributed the rise in the rupee’s value to some of the trade proceeds that exporters have brought into India to avoid a further drop in gains. Basically, they effected sales which also helped the rupee to gain.

Currency per dollar

Feb 25, 09Apr 13, 09% chg
Japanese yen97.39100.31-3.00
Pakistani rupee79.9180.66-0.93
Hong Kong dollar7.757.750.06
Indian rupee49.9549.890.12
Thai baht35.7735.630.39
Singapore dollar1.531.520.85
Malaysian ringgit3.673.631.04
Taiwan dollar34.7433.693.02
Indonesian rupiah11935111206.83

Korean won1516132912.31

Source : Bloomberg

There were also bunched-up inflows accumulated over the past three days in the market, said a dealer with a foreign bank. Banks also sold the dollar after noting that major currencies were rising against the greenback.

“The dollar’s weakness globally pulled the dollar/rupee NDF (non-deliverable forward) rates down, which also added to dollar sales in the market,” said a dealer with a private bank. The one-month NDF rate fell to Rs 50.05, compared with Rs 50.15 on Thursday.

Some banks also covered their short-dollar positions, which limited the rupee’s rise. Volume in the market was thin ahead of a holiday on Tuesday on account of Ambedkar Jayanti. Even a small quantity could move the trend, dealers said. Forward dollar/rupee premiums ended slightly up On Monday, after slipping earlier in the session, as importers bought forward dollars, they added.

“Some importers bought forward dollars as the rupee gained. But the volume in forwards was thin,” said a dealer with a UK bank. However, a sharp rise in forward premiums was limited as exporters sold forward dollars, dealers said. The benchmark one year forward premium ended at 2.19 per cent.

The rupee futures market also saw a similar trend towards appreciation. A total of 341,118 contracts were traded on the NSE platform for currency futures with volumes of Rs 1,704.28 crore.

Offshore contracts indicate traders bet the rupee will trade at 50 to the dollar in a month, compared with expectations for a rate of 50.24 on April 9.

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.

Yen falls against Asian currencies

The yen fell against all of its major counterparts on speculation governments’ efforts to end the global recession will encourage investors to buy higher-yielding assets funded by Japan’s currency.

The yen declined 0.8 per cent to 133.20 per euro at 9:34 a.m. in New York, from 132.18 on April 10. Japan’s currency traded at 100.30 versus the greenback, compared with 100.24.

The euro increased 0.7 per cent to $1.3280 from $1.3189 on April 10, when it reached $1.3090, the lowest since March 18. The Australian dollar rose to a six-month high versus the yen and New Zealand’s currency gained versus the greenback on speculation China is considering additional measures to boost domestic consumption, bolstering the outlook for Asia-Pacific growth.

Thailand’s baht fell to its weakest level this month as anti-government protesters fought police.

“There’s a window here for a pickup in risk appetite,” said Shaun Osborne, chief currency strategist in Toronto at TD Securities, a unit of Canada’s second-largest bank. “We are more bearish on the yen than anything else.”

The Aussie dollar gained 0.9 per cent to 72.64 US cents, while New Zealand’s currency increased 0.5 per cent to 58.67 on speculation China’s economic-stimulus measures will spur growth throughout the Asia-Pacific region.

China’s government will issue some “guideline” policies and continue to use fiscal and taxation measures to spur an expansion, the official China Securities Journal reported On Monday, citing Gao Huiqing, a researcher at the State Information Center, as saying on April 11.