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Rupee gains boosted by shares, Asian peers

business Updated: Oct 11, 2010 11:23 IST
Reuters
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The rupee resumed its climb towards 25-month highs on Monday, bolstered by firm stocks, stronger regional peers and the dollar's weakness against major currencies.

Foreign portfolio investment in equities of more than $8 billion since the start of September has lifted the rupee 6.3 percent, and traders are betting the rising inflow could strengthen the rupee past 44 to the dollar -- a level not seen since August 2008.

At 10:42 am, the partially convertible rupee was at 44.3150/3225, stronger than 44.42/43 at close on Friday.

The unit, which had hit a 25-month-high of 44.1250 on Thursday, is expected to move in a range of 44.15-44.35, dealers said.

"The RBI would do its bit to cushion the momentum in rupee gains with the trend firmly in place for short-term rupee bull run into 43.50-44.00 by on or before end December," said J Moses Harding, head of global markets at IndusInd Bank in Mumbai.

He was referring to the Reserve Bank of India (RBI) governor Duvvuri Subbarao, who said during a panel discussion at the International Monetary Fund in Washington on Saturday that India would intervene in the foreign exchange markets if needed to maintain stability.

Barclays Capital said in a note the comment could trigger profit-taking and limit the pace of the rupee's appreciation.

The outlook for foreign inflows remain upbeat with state-owned Coal India set to open an initial public offering in mid-October to raise up to $3 billion. Other state firms planning follow-on share sales include Power Grid Corp and Steel Authority of India.

Indian shares were trading up 0.4 percent, after rising as high as 1 percent in early trade.

The US dollar slid to 15-year lows versus the yen on Monday as soft jobs data fuelled expectations of more quantitative easing, while the IMF and G7 meetings produced nothing to avert a cycle of competitive depreciation.

The index of the dollar against six majors was down 0.28 percent and most Asian currencies were stronger than the U.S. dollar on Monday.

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