Rupee soars to 9-yr high

Giving jitters to exporters, the Indian currency rose to the highest in almost nine years amidst fresh inflows and speculation that the Reserve Bank of India was keeping away from the market to keep the inflation under control. The rupee rose 1.4 per cent to close at 41.905 against the dollar at the foreign exchange market in Mumbai on Monday.

According to dealers, the rupee has been rising against the dollar as the RBI has been keeping away from the market and banks were selling their dollar holdings to meet liquidity requirements. 8220;The RBI has not made much purchases in the last few weeks as dollar purchases would boost liquidity and push up inflation levels,8221; said a dealer.

The currency rose as high as 41.85 today, the strongest since June 1998. Exporters are likely to be affected by this month8217;s 3.6 per cent rise in the rupee as it would erode profit in local currency terms for Indian companies and exporters. However, importers 8212; mainly oil companies 8212; will benefit from the rupee8217;s rise.

The rupee 8220;appreciation is because of the large inflow of capital,8221; Union finance minister P Chidambaram said. 8220;The rupee is still very competitive relative to other currencies.8221; However, analysts said the deceleration in exports suggests the central bank is unlikely to allow further rupee appreciation.