Re climbs 3%, exporters jittery
The Indian rupee appreciated by 152 paise or 3.08 per cent to reach a five month high of 47.88 amidst expectation of heavy foreign capital inflow and a stable political regime, reports HT Correspondent.business Updated: May 18, 2009 21:45 IST
The Indian rupee appreciated by 152 paise or 3.08 per cent to reach a five month high of 47.88 amidst expectation of heavy foreign capital inflow and a stable political regime.
Analysts said the rupee is likely to appreciate further, due to favourable foreign exchange valuation, an improving current account position, favourable capital account policies and positive risk signals.
With some early signs of stability entering in the global economy and easing of liquidity conditions in the global financial system, some foreign institutional investor (FII) inflows have begun to resume in the domestic stock markets.
“On the rupee, we are constructive, forecasting INR/USD to appreciate to 46.5 by end-2009 and 42.4 by end-2010. With weak fiscal finances, India remains heavily dependent on foreign capital to finance much-needed investment to ease the large infrastructure bottlenecks. So we expect India to broadly maintain a liberalised capital account,” said Sonal Varma, an analyst with Nomura Financial Advisory and Securities.
Forex dealers said the exchange market was in an upbeat mood with strong indications of heavy portfolio investments.
A strong rupee, however, could mean bad news for exporters, already reeling under serious loss of business because of the recession in the US.
Exports contracted for the sixth successive month plunging by 30.1 per cent in March as policy makers grope for options to sustain growth amid the worst slowdown in the world economy in the last 80 years. The rupee had crossed 50 to the US dollar a year after it had appreciated to less than 40. Exporters are now worried about volatility in the forex market.