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Journalism of Courage
The rupee rose half a per cent on the dollar on Wednesday, closing at its highest for over four years as foreign investors snapped up local assets and exporters sold foreign currency exposure in anticipation of more gains.
The rupee closed at 43.5450/5500 per dollar, up from Tuesday’s 43.7250/7450, and its highest level since 43.5425/5475 on January 17, 2000.
Wednesday’s gains took the rupee’s rise for calendar 2004 to 4.7 percent. Strong capital and trade flows have buoyed the Indian unit for nearly two years, helping it rise by 5.2 percent in 2003 and 0.6 percent in 2002.
‘‘Clearly there are still strong inflows, so the pressure on the rupee to appreciate continues to be quite strong,’’ said Siddharth Mathur, strategist at JP Morgan Securities.
‘‘In previous months, the rupee was being held back by continued dollar purchases by the Reserve Bank of India. But the central bank now appears to be more comfortable with a stronger rupee.’’
Foreign portfolio investments have poured in on expectations of a strong showing by India Inc in a booming economy. Indian firms announce January-March earnings this month. The Indian economy is Asia’s third largest and is estimated to have expanded by more than eight percent in the year to March 2004, helped by strong global and domestic demand.
Foreign funds have sunk some $3.5 billion in local shares so far in 2004, after making record investments of $6.7 billion in 2003.
Traders said there were also inflows by way of offshore borrowings by local companies and export remittances.
In the near future, they anticipate inflows of up to $200 million from International Business Machines Corp’s buyout of New Delhi-based back-office firm, Daksh.
The rupee’s recent rise has come in the face of a bounce-back in the dollar globally on the back of robust US Economic data, including a strong jobs report for March. Local traders said the strength of inflows into India would be more influential in determining the rupee’s trend, apart from the central bank’s intervention.
