The Hindu : Business : Rupee at new high

Online edition of India's National Newspaper
Thursday, May 12, 2005

Business

Business

Rupee at new high

Special Correspondent

MUMBAI: The rupee hit a new nearly six-year high on Wednesday at Rs. 43.26 a dollar before closing at 43.29/30 against the previous close of 43.43. This has been the highest level of rupee against the dollar since July 1999.

While some analysts expect that the rupee to gain further against the dollar as they expect a revaluation of Chinese currency yuan, which was undervalued for a long time, others argue that the central bank would not allow the rupee to appreciate further to maintain a certain level of export competitiveness.

In its annual policy, the Reserve Bank of India stated that the exchange rate policy in recent years had been guided by the broad principles of careful monitoring and management of exchange rates with flexibility, without a fixed target or a pre-announced target or a band, coupled with the ability to intervene, if and when necessary.

During 2004-05, the Indian foreign exchange market witnessed orderly conditions with the rupee exhibiting two-way movements. The rupee came under some pressure during April-July 2004 on account of adverse developments in the equity market, rising global oil prices and a fall in capital inflows, the RBI stated. The exchange rate of rupee which stood at 43.39 a dollar at end-March 2004 depreciated by 6.6 per cent to 46.45 by end-July 2004. It recovered and stood at 43.75 at end-March 2005. The Indian currency depreciated by 0.8 per cent against the dollar, 6.2 per cent against the Euro, 3.1 per cent against the British pound sterling, but appreciated by 1.9 per cent against the Japanese yen during 2004-05.

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