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Rupee ends at a nine-week high of 46.56/$

The rupee ended at a nine-week high on Friday on a surge in dollar supplies as both corporates and foreign funds sold the US currency, dealers said.

The rupee ended at 46.55/56 per dollar, a level not seen since November 6 and sharply higher than its previous close of 46.620/625. At its close, the rupee was firmer by 0.34 per cent over the week.

Dealers said the rupee held on to early gains after a large petrochemical firm sold dollars along with foreign banks offering custodial services to foreign funds.

Foreign funds have invested a net $319.1 million in Indian equity and debt so far this month, reversing December's net sales of $88.2 million, and traders expect them to invest more as calendar 2001 allocations flow in.

Currency traders said state-run banks, who often act on the behalf of the central bank, bought dollars in moderate amounts earlier in the day, but then stayed away, helping the rupee appreciate.

In the forward market, premiums opened higher on paying (sell-buy swaps), before softening after call money rates eased on inflows from central bank reverse repos.

Market talk of a cut by the central bank in the benchmark bank rate also sparked receiving (buy-sell swaps), dealers said.

Debt and currency traders and analysts have been speculating the Reserve Bank of India (RBI) will reduce the bank rate after the US Federal Reserve cut rates earlier this month.

Senior bankers have however ruled out any cuts till the end of the financial year on March 31. RBI Governor Bimal Jalan said last weekend that there were several considerations to be taken into account before his bank could follow the Fed's example.

The six-month forward premium ended at 4.46 per cent, compared to the previous close of 4.56 per cent.

Intra-day report

The rupee was firm in early deals on Friday on fresh dollar inflows from foreign funds investing in Indian stock markets, dealers said.

At 11:15 a.m, the rupee was quoted at 46.60/61 per dollar, after opening at 46.615/625, and compared to Thursday's close of 46.62/625. It is firmer by more than 0.2 per cent over its weekend close.

Dealers said dollar sales from banks offering custodial services had outstripped import dollar demand in the past week, boosting the rupee.

Foreign funds have invested a net $319.1 million of Indian equity and debt so far in January, reversing December's net sales of $88.2 million.

Currency traders expect state-run banks, who often act on the behalf of the central bank, would start buying dollars around 46.60, to stop sharp appreciation in the rupee.

Analysts have warned that a sharp appreciation in the Indian currency against the dollar could dent the country's export competitiveness in the sluggish foreign trade market.

A recent Morgan Stanley Dean Witter report said Asian governments are likely to let their currencies weaken to cushion against an export downturn as the US economy goes into recession in the first half.

It said the policy response from non-Japan Asia would be to allow further currency depreciation to boost export volume and lift domestic demand.

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