Making exporters and IT companies nervous, the rupee today soared to more than seven-year-high of 43.04/05 against the US currency as banks stepped up dollar sales in a bid to generate funds to tide over cash crunch in the money market. In brisk activity at the interbank foreign exchange (forex) market, the local currency fluctuated in a wide range of 43.02 and 43.23 before ending at its strongest level since June 1999, buoyed by weak dollar overseas coupled with fairly heavy capital inflows.The absence of the Reserve Bank of India (RBI), which is expected to check the rupee’s sustained surge against dollar, also aided the rupee sentiment for the third consecutive day. “If the RBI had bought dollars from the market, the central bank would have to release an equivalent amount in the rupees. This would have added to inflation,” said a banker.However, the sustained rise in the rupee value has created nervousness among exporters, including IT companies. This is because a strong rupee will reduce the earnings of exporters on conversion of their dollars. The strengthening of the rupee hit IT shares in the stock markets. “A strong rupee will affect the earnings of IT companies,” said a dealer.Meanwhile, dollar weakened against the yen and the euro on Tuesday after US consumer confidence fell below the market expectations, raising fears of a slowdown in economy. On the other hand, foreign institutional investors (FIIs) pumped in $ 500 million into the equity markets between March 20 and 26. FII inflow, which slowed down soon after the budget, have picked up again. Forex market sources said a major reason for the sustained rise in the rupee value is the absence of the RBI. The RBI normally buys dollars to check the rupee from appreciating and sells dollars to prevent the Indian currency from plunging. According to forex dealers, the rupee rise was surprising considering the rise in crude oil prices. The rupee normally remains under pressure whenever oil prices rise. (With PTI)
