Re rises for 7th week in a row

MARKET ROUND-UP

The rupee rose the most in a week in more than a year on speculation the central bank won't stem gains after inflation accelerated at a pace faster than economists expected.

Investment from overseas, lured by growth that touched the fastest pace in almost two decades, helped the currency round off gains for a seventh consecutive week to close at the highest in almost nine years.

The finance minister on April 15 said the rupee is still "very competitive''.

The central bank bought fewer dollars in March after purchasing a record amount in foreign currency in the prior month to prevent excess money from fuelling inflation.

"Their monetary policy emphasises measures to fight inflation, and they may be reluctant to add liquidity until they're sure inflation is under check,'' said Parthasarathi Mukherjee, treasurer at UTI Bank in Mumbai.

"The weakness of the dollar globally will also add to the rupee's strength.'' The rupee rose 1.8 per cent this week to 41.77 against the dollar in Mumbai, the highest close since June 2, 1998, according to data compiled by Bloomberg.

The currency climbed to 41.645 on April 17, the highest intraday level since June 1, 1998. It may break 41 in a year, Mukherjee said.

The central bank bought a record $11.9 billion of foreign currency in February, data provided by the Reserve Bank of India show. It added $4.6 billion to its foreign-exchange reserves the following month, suggesting slower purchases.

Finance Minister Palaniappan Chidambaram earlier this week said a "large inflow'' of capital from overseas was causing the currency to strengthen.

Overseas funds were net buyers of domestic stocks for the ninth day, the longest stretch since November, according to data provided by the stock market regulator, the Securities and Exchange Board of India.