Forex kitty surges to 110 billion

Propelled by inflows, forex reserves grew by 26.4 billion for the nine-month period ended December 31, 2003, over a rise of 16.3 billion in the corresponding period of the previous fiscal. The rupee, meanwhile, ended 30 paise lower at 43.7350/7450 against the dollar on the last trading day of the week gone by on downward correction.

Opening the day at 43.35/40 on Friday, the rupee underwent a sharp downward correction after touching nearly 57-month peaks in choppy two-way trades. It tumbled to 43.67/73 in late morning deals on heavy bunched-up corporate and import dollar demand. State-run banks, possibly on behalf of the RBI, bought dollars which fuelled dollar demand from other participants. Persistent heavy foreign fund inflows from a spate of initial public offerings, mainly disinvestment in large energy companies have flooded the currency market ahead of the fiscal year-end with hardly any demand from corporates and importers, despite the customary month-end considerations.

Meanwhile, the dollar surged to its biggest gain versus the euro in more than two years, after a US government report showed the economy added the most jobs since April 2000.

Traders drove the dollar up against 14 of the 16 major currencies on expectations that job growth will prompt the Federal Reserve to raise its target interest rate from a four-decade low as soon as September luring foreign investorsback to the US. The dollar had its biggest gain against the euro since September 4, 2001, rising 2.06 per cent to 1.2115 dollar in New York from 1.2365 late Thursday.