Rupee posts biggest single-day rise in 10 yrs

Driven by the sustained rise in shares, heavy dollar sales by corporates and the unwinding of long dollar positions by banks, the Indian rupee posted its biggest single-day gain in more than a decade on Tuesday. The rupee closed at 47.69/71 per dollar, two per cent stronger than 48.64/65 at Monday's close. Last week, the rupee had dropped to a record low of 50.29.
According to dealers, it was the biggest single-day gain for the rupee since January 19, 1998, when the rupee had risen 3.6 per cent after the central bank had taken a number of steps including a hikes in the cash reserve ratio, repo rate and bank rate. “There was a lot of dollar supply and no real demand in the market. People are now expecting more foreign inflows following the RBI cut in CRR, SLR and repo rate on last Saturday,” dealers said. Dealers said dollar in-flows from a large pharmaceutical company also helped the rupee rally.
Hopes that cuts in bank lending rates would help credit flow more freely and ease a cash squeeze also boosted the sentiment.

The Rupee tumbles to a Six year low

The Indian rupee fell to its lowest close in more than six years on Friday, after the main stock index tumbled below 10,000 points intensifying worries of capital outflows.The partially convertible rupee dropped to 48.88/89 per dollar, its lowest close since June 25, 2002 and a shade weaker than Thursday’s close of 48.82/83. It fell to a record intraday low of 49.30 last week. The rupee has fallen for 10 weeks in a row. The rupee has lost 19.4 per cent this year, after gaining more than 12 per cent in 2007 when foreign flows into stocks hit a record $17.4 billion. The unit has also been pressured by a widening trade deficit, following high oil prices over the past few months.

The Indian Rupee and the US Dollar

Last September, when the rupee was at 40.69/$ and rising, exporters rushed to sell their dollars and buy rupees. Its ironic that just a year later, the Indian currency doesn’t find many takers in the foreign exchange market. As the rupee dropped to 44.62/$ on Monday, pressured by dollar demand from oil companies and weak inflows into the stock market, exporters were also nowhere to be seen. After gaining 10.3% to end 2007 around 38.42/$, the rupee has struggled in 2008. So far this calendar year, the currency has dropped 16% and is threatening to end the year at 45/$ or below, a level last seen in 2006. Forex dealers say the rupee is likely to weaken to 45/$ and beyond as the dollar continues to gains strength overseas and inflows are not expected to recover soon.

The Rupee Rate

The Rupee has slid to a 17 month low against the US Dollar.