Rupee hits 11-month high, ends at 58.79 on RBI intervention
Riding high on the Modi wave and tracking a bull run on Dalal Street , the rupee on Friday rose to a 11-month high of 58.62 against the US dollar in morning trade as the Bharatiya Janata Party-led National Democratic Alliance swept the 16th Lok Sabha elections.business Updated: May 16, 2014 22:13 IST
Riding high on the Modi wave and tracking a bull run on Dalal Street , the rupee on Friday rose to a 11-month high of 58.62 against the US dollar in morning trade as the Bharatiya Janata Party-led National Democratic Alliance swept the 16th Lok Sabha elections. The currency, however, gave up some gains to end at 58.79, up 40 paise, on suspected forex buying by the Reserve Bank of India (RBI) and profit-booking in stock markets.
For the week, the rupee rose 2.1%, its third consecutive weekly gain and also its biggest weekly rise since the week to September 13. Since January, the currency has risen 4.67% and is the second-biggest gainer in Asia after the Indonesian rupiah.
The strong gains come less than a year after India was gripped by its worst currency crisis since the balance of payment crisis in 1991. The rupee has appreciated 17.5% since the record low of 68.28 hit in August.
Analysts, however, warned that the gains could be at risk if the new government fails to live up to expectations.
“The to-do list is long and the ball is in the incoming government’s court to walk the talk on reviving growth and addressing macro challenges,” said Radhika Rao, an economist for DBS in Singapore.
“Clearly financial markets have gone far ahead of fundamentals,” said Ananth G Narayan, co-head of wholesale banking for South Asia at Standard Chartered.
Traders expect the rupee to hold in a 58.50 to 59.50 per dollar range for the next week.
A strong rupee makes oil and gold imports cheaper and helps in reining the current account deficit — the difference between inflows and outflows of a foreign currency. A weak rupee can hurt exports, push inflation and fuel interest rate hikes.