Helped by an unabated flow of foreign funds and the central bank’s decision to remain on the sidelines as far as foreign currency rates are concerned, the rupee appreciated to an over-two-year high against the US dollar on Thursday. Interestingly, while a deputy governor of RBI has spoken about some measures to control the flow of capital, there has not been any direct intervention in the forex market yet by the central bank to tame the rise of the rupee. On Thursday, the rupee appreciated by 30 paise to close at 44.20 to a dollar, a level last seen in early-September 2008. Since September 1 this year, the rupee has now gained nearly Rs 3, or 6.1%, against the greenback. And if market players are to be believed, unless there is any central bank intervention, it could rise above the 44 mark over the next few weeks.
The strong inflow of foreign money into the stock market is the main reason for
this appreciation of the rupee. Net FII inflows so far this year has crossed $21 billion and given the demand for Indian stocks, it is set to rise further. The inflows have also taken the stock market to near its record highs.
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