The rupee today gained a hefty 93 paise to close at over 4-month high of 53.45 on massive USD 430 million capital inflows,amid government lowering a tax for overseas borrowing by local companies and easing of recent political worries. Heavy dollar selling by exporters and some banks on the back of weakness in dollar overseas also boosted the rupee sentiment,forex dealers said. At the Interbank Foreign Exchange (Forex) market,the rupee opened higher at 54.15 a dollar from previous close of 54.38 and immediately touched a low of 54.20. Helped by FII inflows worth Rs 2,327.82 crore (about USD 430 million),the rupee later rallied to a high of 53.33 before settling at a four-month high of 53.45 - up 93 paise,or 1.71 per cent over yesterday's close. The unit also recorded its third successive week of gains. Today's gain is one of the biggest gains logged by the currency in this year. On September 14,rupee vaulted 113 paise or 2.03 per cent to close at 54.30. The buying in favour of rupee also received a boost after Finance Minister P Chidambaram today cut withholding tax on overseas borrowings to 5 per cent from 20 per cent,a move expected to bridge current-account shortfall that previously fuelled the slide in rupee. "The statement of Samajwadi Party to continue support to UPA-II along with steps regarding withholding tax in case of borrowing through ECB route supported the sentiment," said Hemal Doshi,Currency Strategist,Geojit Comtrade. The dollar index was down by 0.28 per cent against a basket of six major global rivals. This happened after reports said Spain and European officials were working together on a plan for economic reforms. "Rupee movement was mainly due to buoyed movement in equity market along with sound inflows from FIIs.Though there was some kind of demand for dollars from oil importers,that has been met without impacting the rupee movement," N S Venkatesh,treasury head,IDBI Bank said. Pramit Brahmbhatt,CEO,Alpari Financial Services (India) said," The rise in domestic equity markets on active policy reforms by the government along with declines in dollar index pulled the rupee to over four-month high." The cut in withholding tax and foreign borrowing costs boosted the capital markets resulted in rise in dollar supply thereby pushing the INR to multi-month highs,he added. "The local news was the major factor behind the large movement of the rupee.the effect of the easing announced by the major central banks across the globe could be clearly felt making the global markets to rally. But still a lot more needs to be done to get the global economy on track which has slowed own," said Abhishek Goenka,Founder & CEO,India Forex Advisors. The premium for the forward dollar dropped sharply on fresh receipts by exporters. The benchmark six-month forward dollar premium payable in February dropped to 140-1/2-142-1/2 paise from Thursday's close of 149-151 paise. The premium for far-forward contracts maturing in August also tumbled to 286-288 paise from 299-301 paise. The RBI has fixed the reference rate for the US dollar at 53.9055 and for euro at 70.0095. The rupee rebounded sharply to 86.93 against the pound sterling from previous close of 88.02,while remained strong against the euro to 69.35 from 70.40. It also zoomed against the Japanese yen to 68.37 per 100 yen from last close of 69.52.
