Rupee surges against dollar on yuan revaluation buzz

Speculation about the revaluation of the Chinese yuan over the weekend led to the rupee gaining almost 17/18 paise today to close at a two-month high of 43.52/53 to a dollar after opening at 43.70 to a dollar.

According to foreign exchange dealers, while the rumours lifted the local currency, panic selling of receivables by the exporters in order to avoid losses added thrust to the appreciation. The yuan is pegged at 8.277 per dollar.

The Reserve Bank of India governor Yaga Venugopal Reddy's comment (in an interview to agencies) said that possible revaluation in the Chinese yuan was unlikely to have an adverse impact on India's economy and might even boost trade competitiveness also added to the sentiment.

"The market, however, is divided in the view of yuan appreciation. While some feel it will be a mild appreciation, some feel the yuan might be allowed to appreciate much faster," said a dealer with a foreign bank.

The authorities from people's Bank of China have, however, denied of any such move, the dealer added.

After a long gap, the spot rupee witnessed such a wide movement. Over the last few weeks, trading in the forex market has been subdued with no incremental capital inflows.

Premium on the forward dollars too came off and tracked the spot rupee with six-month and one-year annualised forward dollars closing at 1.74 per cent and 1.49 per cent.

The forward dollars shot up on Thursday after the Reserve Bank of India announced a 25 basis points hike in the reverse repo rate.

With an increase in the interest rate differential between US and India, importers - led by oil companies - rushed for covering their import obligations with six-month and one-year annualised premiums touching 1.81 per cent and 1.54 per cent, respectively.