Rupee maintains 8-year high, closes flat at 42.90/92 vs USD

Mumbai, Apr 9 (UNI) The rupee maintained an eight-year high at 42.90/92 in today's closing session as compared to the previous day's close on April 5 as prospect of capital inflows spurred investors to buy the currency, dealers said.

The market resumed after the last three day holidays including Good Friday.

It opened flat at 42.90/93 and later recorded a high of Rs 42.75/76 and a low of 43.06/06 during intra-day trade. The current closing rate is maintained an eight-year high at 42.90/92, traders pointed out.

A leading dealer informed that they remained wary of intervention by the Reserve Bank of India (RBI).

The central bank is suspected of having sold domestic units regularly since November in a bid to rein in the local unit, which has risen about 10 per cent since last July, when it hit a 3-year low.

The rupee's gains have been powered by robust capital inflows into Asia's fourth largest economy, and the central bank is thought to be uncomfortable with the pace of its appreciation.

The rupee seemes to be overvalued by 10.6 per cent as compared with 7.9 per cent a month ago.

The RBI's intervention has fuelled money supply growth and inflation, both running above its target band. With the central bank focused on taming inflation, many investors believe any further intervention will be muted in the near term, brokers said.

The dollar strengthened against some Asian currencies after strong March jobs data on Friday eased concerns about a slowdown in the US economy and dimmed the chances of a rate cut in the near term, dealers informed.

The home currency ended flat as dollar supply from exporters and overseas inflows offset demand from importers.

A leading dealer said ''I would put a range between 8.20 to 8.50 per cent. At this point of time, it is firmly settled between 8.15 to 8.25 per cent, but going forward, if there is one more rate hike then it will breach that range on the upward side.'' Forward premia ended lower due to sell forward US dollars in the market. Six-month and 12-month forward premia closed at 5.08 per cent (5.36) and 4.06 per cent (4.24) respectively.

The RBI today fixed the reference rate at Rs 42.88 per US dollar, up by 27 paise from its last Thursday's rate of Rs 43.15 per USD, according to a RBI spokesperson here.

Besides, the domestic unit witnessed a stronger trend against major world currencies. Against the Euro it closed lower at 57.31/32 (57.22/24), while Pound finished higher at 84.10/11 (84.30/32) per unit each and Yen was also quoted higher at 35.91/92 (36.00/02) per 100 units, brokers added.

UNI