Credit Policy Impact: Re moves up to 40.38/$

The rupee rallied sharply today on buying by global investors as the Reserve Bank of India lifted the daily borrowing limit for money market operations. A surging stock market also attracted inflows, dealers said.

The rupee ended at 40.38 per dollar rising from Monday's close of 40.54 per dollar, and moved within the striking distance of last week's peak of 40.20 per dollar.

ADB in talks with India on currency swap

The Asian Development Bank (ADB) is in talks with India about a currency swap that would help fund infrastructure projects without adding to the inflows that are complicating monetary policy, senior officials said on Thursday.

Officials from the Manila-based ADB told the media on a visit to Mumbai a dollar-rupee currency swap could help fund India's infrastructure development needs, now estimated at $475 billion over five years, without currency risk to the end-user.

India's strong rate of economic growth and soaring stock market is attracting billions of dollars in direct and portfolio foreign investment, pushing up the rupee and causing a monetary policy headache for the Reserve Bank of India (RBI).

Read more in The Economic Times

Re closes at 40.34/35 vs dlr

The rupee on Thursday closed barely steady at 40.34/35 against the US dollar in a two-way movements on alternate bouts of buying and selling.

In active trade at the Interbank Foreign Exchange (Forex) market, the Indian currency opened at 40.34/35 per dollar but recovered in late morning deals to a high of 40.27 a dollar on firm equity markets where the benchmark Sensex was up by nearly 113 points in early trade.

However, dollar purchases by state-run banks on behalf of the Reserve Bank of India (RBI) after afternoon pulled the rupee down to close at the opening level of 40.34/35 a dollar, barely steady against Wednesday's close of 40.35/36 a dollar.

Read more in The Economic Times

Rupee sees biggest fall in 11 years

The rupee had its biggest single-day fall in 11 years against the dollar on Thursday, amid buying of dollars by importers following the greenback’s sharp falls over the last few days and also on suspected intervention by the Reserve Bank of India (RBI).

The rupee fell 1.7 per cent to Rs 43.76 a dollar at close. The decline was the biggest since March 1996.

Dealers said it made sense for importers, particularly oil companies, to buy dollars after the recent sharp fall versus the rupee. The rupee has gained about 7.5 per cent since July 2006. The Indian currency touched an 8-year high of 43.05 yesterday.

The rupee had strengthened against the dollar because of the liquidity squeeze. Banks were selling dollars to replenish rupee liquidity excessively drained after tax outflows around March 15.

A dealer said the RBI was buying dollars at around Rs 43.50 and this, combined with importer demand, led to the rupee dropping the sharpest in 11 years.

The buying of dollars by the RBI and to some extent government spending infused rupee liquidity into the banking system, causing the call rates to close at 10 per cent on Thursday. The call rate closed at 10 per cent on Thursday.

The average weighted call rate yesterday was over 25 per cent.