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

RBI's hands-off strategy irks IT industry

India's IT industry, the flag bearer of a resurgent economy, wants the government to step in and check the rupee's unprecedented rise to nine-year highs in an effort to protect their earnings.

The rupee has gained almost 10 per cent this year and 14 per cent over the past 12 months against the dollar, denting the earnings of an industry that gets two-thirds of its 50 billion dollars in annual revenue from the US.

"It's not a market driven by market forces alone," said Kiran Karnik, president of the National Association of Software and Services Companies (NASSCOM), in an interview here. "These are not normal times."

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 at a 9-yr high, travellers cheer

The Indian rupee is acquiring muscle as if it was on steroids, affecting the way a host of institutions and companies have been doing business, some adversely, like IT sector and apparel, while Indian tourists have seen the strong rupee make for cheaper travel abroad as it now buys more foreign currency than it did before.

The Indian currency breached the 9-year high rate set in May 1998, by closing at Rs 40.28 to the US dollar, after having threatened to do the same in May 2007 when it reached an intra-day high of Rs 40.28, though it did not close at that level, having weakened at the fag end of day. The Monday, 23 July 2007 intra-day high that the rupee reached was Rs 40.23.

While this was mainly due to the high inflows of money via the foreign institutional investors, what is encouraging the rupee towards increasing potency is the weakening US dollar—rupee has become stronger by 9.05% in 2007 itself.

The Reserve Bank of India has been trying to sell dollars to keep the rupee weak so that exporters are not impacted too severely, after having kept a hands-off policy for a month and more earlier, but even this is proving inadequate as FIIs have flooded India with dollars in an attempt to buy into Indian equity markets. Ergo, the Sensex closing at yet another all-time high of 15,732.20, up 167 points on Monday. Analysts are saying that if the RBI stops selling dollars the rupee will weaken to below Rs 40 levels.

But for the Indian bent on travelling abroad, the rise and rise of the rupee is a great opportunity to voyage more, see more, buy more and yes, enjoy more. It also brings the added incentive of making foreigners treat the Indian tourist with much more respect—earlier the Indian traveller was the most frugal one and therefore, foreigners were not very conducive to providing extra deluxe service. That has changed now. A rise in the value of the rupee by 9% against the dollar means that you are getting a bigger bang for your desi buck and you can splurge on luxuries too now.

Customers at Thomas Cook counters, you can also buy forex from SOTC and other banks in India, are a happy lot. Vineet Nayyar, a student jetting off to the US for an MBA, no he does not have admission in any college, but as he said, “I am going abroad to look for opportunities. Whether they are in terms of jobs or study, I will decide later. The very fact that the dollar is cheaper, is allowing me to spend an extra four days in US on my budget. It’s great.”

FII investments since January 2007:

Date	Purchase (Rs cr)	Sale (Rs cr)	Net (Rs cr)
July1	58791.1	37340	21451.1
June	49249.5	47606.8	1642.7
May	47254.2	43155.4	4098.8
April	48141.2	41462.1	6679.1
March	50678.5	51760.3	-1081.8
Feb	55803.9	48564.2	7239.7
January	45052.2	44560.1	492.1

¹Up to July 20

(Rs m)	MFs	FIIs	Total
13-Jul	2,958	23,464	26,422
16-Jul	(3,719)	16,601	12,882
17-Jul	(1,030)	9,464	8,434
18-Jul	(1,748)	12,337	10,589
19-Jul	1,116	8,831	9,947
23- Jul		10,255
Total	(2,423)	70,697	68,274

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.