Date:04/11/2004 URL: http://www.thehindubusinessline.com/2004/11/04/stories/2004110402960100.htm

Back Rupee gains as sentiment improves

Our Bureau

THE rupee appreciated by 18 paise on Wednesday to close at 45.37/3750 per dollar on the back of improved market sentiment fuelled by various international developments.

On Tuesday, the domestic currency closed at 45.55.

According to analysts, an impending victory for Mr George W. Bush in the US elections, easing of global oil prices, and the dollar's weakness against international currency majors are among the factors that improved the market sentiment.

The rupee was riding high on good dollar inflows following a rally in the domestic equity markets, currency traders said.

"All eyes were on the US elections, and the anticipated victory of Mr Bush was perceived as a positive for the market which bolstered sentiment," said a dealer.

After opening at 45.50/55, the rupee rallied on the back of a significant amount of selling by exporters and unwinding of long dollar positions across the board to close at a new four-and-a-half-month high.

"Many market players had built up long dollar positions in anticipation of huge dollar demand from importers. However, since oil prices have eased, it is unlikely that the demand for the greenback will be to the extent that was initially expected. This led to an unwinding of long dollars in the market, which added to the dollar liquidity," said a forex dealer with a private sector bank.

Analysts are of the view, that the near-term outlook for the rupee will continue to be tied to factors like the movement in global oil prices and the domestic inflation situation.

Meanwhile, in the forwards market, the six-month premium ended at 2.75 per cent (2.80 per cent) and the premium for one-year ended at 2.25 per cent (2.25 per cent).