Forex market hails UPA mandate; dollar cheaper by 152 paise

Mumbai, May 18 (PTI) Foreign exchange markets in India
Monday saluted the mandate for the UPA government as the
dollar became cheaper by 152 paise during the day, the highest
in over two decades, signalling a higher inflow of foreign
funds in India.

Reflecting the buoyancy in the market, the rupee
gained 3.02 per cent to a five-month high of 47.88/89 against
the dollar on hopes of heavy capital inflows, which the
analysts say 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 India's rivals
like China will also turn more cheap, creating greater
competition in the domestic market.

The Indian benchmark zoomed by 2,110.79 points or 17.34
per cent in response to the emerging political stability in
the country after the general elections.



The Interbank Foreign Exchange (forex) market witnessed
fairly active trade this morning 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.

The Indian unit moved in a range of 47.75 and 48.65 after
resuming with a wide gap of 92 paise at 48.48/52 a dollar from
its previous close of 49.40/42 a dollar.

Forex dealers said the exchange market was in an upbeat
mood with strong indications of heavy portfolio investments,
which analysts estimated at about USD 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.

The Reserve Bank of India (RBI) fixed the reference rate
for the US dollar at Rs 48.17 and for the euro at Rs 64.81.

Rupee premiums on the forward dollar ended sharply lower
on sustained receivings from exporters.

The benchmark six-month forward dollar premium payable in
October ended at 52-1/2-54-1/2 paise, lower from 63-65 paise
on last Friday, and the far-forwards maturing in April also
finished lower at 93-95 paise from 108-110 paise previously.
]
In cross-currency trade, the Indian rupee firmed sharply
against the pound sterling, the euro and the Japanese yen.


The domestic currency strengthened against the pound
sterling to end the day at Rs 73.17/19 from the last weekend's
level of Rs 75.01/03 and spurted against the euro to Rs
64.48/50 from Rs 66.97/99 previously.

It also rose against the Japanese yen to settle the day
at Rs 49.91/93 per 100 yen from the last closing level of
Rs 51.98/52.00 per 100 yen. PTI RSU
PMR
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