Re breaches 41 mark for first time since 1998

The spot rupee today breached the barrier of 41 to the dollar for the first time since 1998 following huge corporate inflows, exporter selling and lack of intervention by the RBI to buy dollars.

Market dealers, however, maintained that it was not a unidirectional rally since a demand for dollars emanated from oil companies that are buying at every low. Therefore, while the dollar witnessed an intra-day high of 40.87, it also fell to a low of 41.14 during the day.

The monetary policy announced by the RBI on Tuesday has been the main trigger for the appreciation in the rupee, since the target for inflation is now pegged lower at 4-4.5 per cent, as against 5-5.5 per cent a year before.

"The trend for the rupee will be towards appreciation since the inflows are more long term in nature. This is because they are coming in in the form of foreign direct investment and corporate external commercial borrowings, besides regular portfolio investment in the equity market," said Partha Mukherjee, head of treasury, UTI Bank.

Meanwhile, easing liquidity in the money market led to the call rate ranging between 7 per cent and 9 per cent.

The government securities prices moved up by 20-30 paise across maturities, with the ten-year benchmark yield moving down to 7.98 per cent, as against 8.02 per cent on Wednesday. The cut off yield in the auction of 91-day T-bill was announced at 7.35 per cent, as against 7.48 per cent a week ago.