Surge in capital inflows helps Rupee to new high

Mumbai, Apr 23: The Indian Rupee tested a fresh nine-year high today, as capital inflows surged, prompting investors to bet the Rupee would rise further and build short positions in the dollar.

The Rupee ended at 41.67/68 per dollar, off an early peak of 41.58, its highest since May 1998.

The domestic unit had closed at 41.76/77 on Friday. Rupee rose nine paise in the session before closing at 41.67/68 against the USD.

Earlier in the morning session, Rupee surged to its highest level since May'98 at 41.58 against as banks resumed dollar selling in the market owing to severe cash shortage in the banking system.

Robust capital inflows also hit the local equity market thereby supporting the Rupee at regular intervals. Later, Rupee fell marginally as traders said oil companies were buing dollars.

A large section of the market suspected that Reserve Bank of India will tighten norms for External commercial borrowings (ECBs) at a monetary policy review on Tuesday, in a bid stem the Rupee's gains.

Also trading volumes would remain elevated as the Rupee swung between buying by exporters and selling by carry traders and equity inflows, coupled with uncertainty over the RBI's stance on the currency.

Forward premia rose by 5-6 paise as liquidity tightness in the money market was reflected in the forwards markets through sell-buy swap contracts. Six-month and twelve-month forward premia closed at 6.7 percent and 5.02 percent, respectively.

The Reserve Bank of India (RBI) today fixed the reference rate at Rs 41.67 per US dollar, up by 32 paise from its Friday's rate of Rs 41.99 per USD, according to a RBI spokesperson here.

UNI