The retreat from this level was on account of corporate demand and brief intervention by the Reserve Bank of India (RBI). With this, the rupee has gained close to 9 per cent during the fiscal year from its closing level of 47.40 on April 1, 2003. Bankers do not anticipate the rate of appreciation to continue at such a speed in the short term.
A combination of factors is leading to the appreciation of the rupee. The RBI seems unwilling to take on the market when the dollar inflow is high on account of foreign institutional investor (FII) subscription to the shares the government is divesting in its companies.
Besides, by letting the rupee appreciate, the RBI is also trying to contain inflation as import costs will come down, said a banker. It might also be refraining from aggressive intervention as it did not want to add to the money supply, which had already breached the targeted level, added another banker.
