The Hindu Business Line : Rupee surges by 65 paise

Mumbai, July 23 The rupee on Wednesday gained 65 paise against the dollar backed by a host of positive factors. Apart from the government winning the trust vote, the fall in international crude prices and the rally in the domestic equity market helped the local currency to strengthen, said currency dealers. The price of crude cooled to $126 per barrel.

The rupee opened higher at 42.48/50 and closed at 42.08/09, against the previous close of 42.73/74.

A forex dealer said big corporate houses were seen selling dollars. In the non-deliverable forward market, dollars were sold as participants were seen unwinding their positions as the rupee strengthened, he said.

Some dealers said that the rally could be short-lived. Barring a marginal fall in oil prices, there has not been any change in the fundamentals.

Mr. V. Rajagopal, Chief Dealer, Forex, Kotak Bank, said the rupee’s rally was just a temporary correction. The currency may weaken soon as the underlying fundamentals remain unchanged.

However, others say that economic reforms in the future could prop up the rupee.

‘We think the outcome of the trust vote is bullish for the Indian rupee in the short-term, especially if it follows more liberalisation leading to more inflows and divestment of government stake in public sector companies. The latter may also help in reducing the alarming increase in the fiscal deficit,’ said Mr Tushar Poddar, Vice-President, Asia Economic Research, Goldman Sachs.

In the forward market, the 6-month premium closed lower at 4.77 per cent (5.17) and the 12-month ended at 4.07 per cent (4.34).

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