Date:15/09/2004 URL: http://www.thehindubusinessline.com/2004/09/15/stories/2004091503150100.htm

Back Rupee touches 2-month high, breaches 46

Our Bureau

Mumbai , Sept. 14

DESPITE the inflationary pressures in the economy, the rupee has appreciated by 35 paise against the dollar in the past couple of days.

The rupee touched a two-month high on Tuesday breaching the 46 mark to close at 45.90/91. The domestic currency appreciated 27 paise on Tuesday.On Monday, it had closed at 46.17.According to forex dealers, a combination of factors has affected the market sentiment. To begin with, the hike in CRR has given out the message that the RBI may not be aggressively buying dollars. On the other hand, it may sell dollars to support the rupee. This has changed the short-term outlook for rupee.

Besides, the non-deliverable forwards related arbitrage also propelled the domestic currency on Tuesday.

Dealers said there has been increased dollar supply as corporates - cancelling imports contracts - have sold greenbacks to take advantage of the arbitrage opportunity.

Forex dealers expect the rupee to appreciate to 45.60-45.75 levels in the next few days.

The sentiment is turning in favour of an appreciating rupee with expectations of foreign inflows in the form of both foreign direct investment and foreign institutional investments, they said.

Forwards closed substantially lower today, as there was erosion of nearly 17 paise in the one year forward. Six-month forward closed at 1.20 per cent (1.72 per cent) while the twelve-month forward closed at 1.14 per cent (1.55 per cent).