Rupee rises by 3 per cent

The rupee vaulted by three per cent against the dollar on Monday,the highest in over two decades,signalling a higher inflow of foreign funds in India....

The rupee vaulted by three per cent against the dollar on Monday,the highest in over two decades,signalling a higher inflow of foreign funds in India.

Indicating the buoyancy in the forex market after the UPA victory in the elections,the rupee gained 152 paise to a five-month high of 47.88/89 against the dollar on hopes of heavy capital inflows. This is the single-largest appreciation of the Indian currency since 1986. In the process,the rupee breached the 48 level for the first time since December 19,2008.

A stronger rupee will make imports cheaper,thereby giving a fillip to firms whose manufacturing process depends on equpment shipped from overseas,analysts say. Besides,imports of finished products from Indias rivals like China will also turn more cheap,creating greater competition in the domestic market.

Story continues below this ad

The forex market witnessed fairly active trade as the local equity markets hit the upper circuit filter,leading to suspension of trading twice after the election mandate generated euphoric conditions in Indian markets.

Dealers said the exchange market was in an upbeat mood with strong indications of heavy portfolio investments,which analysts estimated at about $50 billion through FDI,ECB and equity. The government is expected to push forward the reforms agenda paving the way for increased capital inflows,the prime driver for the rupee.