Rupee hits near 11-month high

Tuesday, 13 May 2014 00:01 -     - {{hitsCtrl.values.hits}}

REUTERS: The rupee ended firmer on Monday at its highest level in near 11 months on stock-related inflows, despite dollar buying by one of the two state banks at a steady level to prevent further appreciation in the local currency. The rupee ended at Rs. 130.35/37 per dollar, its highest close since 28 June, 2013, firmer from Friday’s close of Rs. 130.42/44. It has gained 0.19% in the last three sessions through Monday. “The rupee is in the appreciation trend. We don’t see FDIs coming in, but there are inflows like stock-related and other project-related, putting the appreciation pressure on the currency,” said a currency dealer asking not to be named. Dealers said one of the two state banks, through which the central bank usually intervenes to direct the market, bought dollars at Rs. 130.35, 5 cents below Friday’s level. “It looks like they (the Central Bank) had lowered the range from Rs. 130.40 to Rs. 130.35,” the dealer said. Central Bank Governor Ajith Nivard Cabraal on Friday told Reuters that the Central Bank is “giving effect to the present trend in a gradual manner”. Dealers said steady inflows from remittances and exporter conversions amid lack of importer dollar demand led to appreciation in the local currency. Many dealers said the rupee would be under upward pressure until credit growth and imports reverse their trends. Despite a multi-year low interest rate regime, latest data showed private sector credit grew 4.4% in February from a year earlier, the slowest expansion since May 2010, while imports in February fell 6.2% on year. Dealers said lack of credit expansion and a contraction in imports could hit economic growth unless the Government props up expansion through infrastructure funding. The Central Bank, in its monetary policy statement last month, however, expressed confidence that private sector credit growth would rebound in the second quarter and push up the pace of economic growth. The currency has hovered between Rs. 130.55 and Rs. 130.70 since 3 March through Thursday, Thomson Reuters data showed, with the central bank intervening to smoothen any sharp volatility.