The Hindu : Business : Rupee rallies after initial blips

Online edition of India's National Newspaper
Friday, May 14, 2004

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Business

Rupee rallies after initial blips

MUMBAI, MAY 13. Despite the initial blips on political concerns, the rupee rallied smartly against the U.S. currency today after the Lok Sabha results indicated that the Congress and its allies could form a stable government at the Centre, but rising global crude oil prices limited its gains.

In choppy two-way trading at the interbank foreign exchange market, the rupee ended at 45.26/29 a dollar, a further 10 paise gain from Wednesday's close of 45.37/39, but off the high of 44.98/45.02 struck in the afternoon, following indication that a stable government could be formed. It opened distinctly weak at 45.57/60 and tumbled to 45.70 in early deals after early trends indicated a hung Parliament.

Overcoming severe early pressures on concerns of the outcome of the elections, the rupee bounced back smartly and even posted further sharp gains to touch 44.98-45.02 after sentiment turned for the better on positive poll trends. However, surging global crude oil prices and worries over interest rate hikes weighed on rupee value and it settled at 45.26/29 at close, dealers said. The U.S. light crude climbed to a peak at $40.38 a barrel, a new 13-year high.

Political uncertainties that eroded nearly 3 per cent of the rupee value since the last week of April appears to have ended now that the Congress-led secular force will be able to form a stable government at the Centre.

The Reserve Bank of India fixed the reference rate for the U.S. currency at Rs. 45.12 and for the single European unit at Rs. 53.50.

The rupee had declined by a whopping 75 paise in the early part of the week following political uncertainties, surging global crude oil prices and resurgent dollar overseas.

The futures market was quiet, but forward dollar discounts deepened, as banks and corporates continued with their buy/sell swaps.

In cross currency deals, the rupee rallied against both euro and the British pound sterling.

PTI

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