Rupee at 15-month high on FII inflows

The rupee on Wednesday hit a 15-month high against the US dollar. The movement was in line with the appreciation of other Asian currencies and was partly due to sale of the greenback by some Indian companies.

According to Bloomberg data, the rupee closed at 45.86 against the dollar, about 0.84 per cent higher than Tuesday’s close of 46.25. Wednesday’s closing is the highest since September 2008, when the global credit crisis resulted in an appreciation of the dollar. As a result of poor portfolio flows and export earnings, the rupee had a hit a lifetime low of 52.19 against the dollar last March.

In recent weeks, the currency has appreciated against the dollar on the back of a spurt in foreign institutional investment (FII). Last year, FII flows were estimated at close to $17.5 billion, around $330 million lower than the record seen in 2007, when the rupee had appreciated to around 39 against the US currency. 

Dealers said most Asian currencies were strong against the dollar in the morning. It set the stage for the rupee to strengthen. While the appreciation was line with the expectation, the extent of the rise came as a surprise. Exporters rushed to sell dollars noting the movement.

The treasury head of a small private sector bank said one company sold about $200 million (over Rs 900 crore), which also pushed up the Indian currency in a thin market.

CURRENCY PER DOLLAR
	31-Dec, 2009	Jan 06, 2010
Korean won	1164.00	1136.40
Indian rupee	46.53	45.86
Indonesian rupiah	9404.00	9279.00
British pound	1.62	1.60
Malaysian ringgit	3.43	3.38
Japanese yen	93.02	92.20
Thai baht	33.37	33.14
Singapore dollar	1.40	1.40
Brazilian real	1.75	1.74
Taiwan dollar	31.99	31.87
Hong Kong dollar	7.75	7.76
Euro	1.43	1.44
Source : Bloomberg

The onshore one-year dollar premium moved down for the third straight session to 116 points from around 131 points at the close of last year, indicating the rupee may depreciate at a slower pace than anticipated before. The six-month forward premium was at 2.59 per cent.

One-month offshore non-deliverable one month forward contracts ended at 45.78/88, little changed from the onshore spot rate. This indicates that the rupee will trade around the same level a month from now.

Dealers are, however, expecting the rupee to strengthen further as FII inflows will surge due to a spurt in public issue by companies, including public sector players.