Rupee crosses 40 per dollar since 1998

NEW DELHI — The Indian rupee rose to a nine-year high against the US dollar yesterday amid strong demand from foreign funds investing in one of the world’s fastest growing economies.

By (AP)

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Published: Fri 21 Sep 2007, 9:53 AM

Last updated: Sat 4 Apr 2015, 11:42 PM

The rupee rose to 39.92 per dollar in intraday trading, breaching the psychologically crucial 40 rupees-per-dollar mark for the first time since May 1998.

The rupee has appreciated more than 10 per cent against the dollar so far this year as global investors have flocked to India, where the economy is growing about 9 per cent annually and the stock market has been climbing to record highs.

Analysts expect the rupee to remain strong through this quarter, although that could hurt exporters, especially the country’s hugely profitable outsourcing industry.

"It will stay around 40 for some time,” said Agam Gupta, head of foreign exchange trading at Standard Chartered Bank in India.

The rupee’s strength has come despite measures by the Reserve Bank of India to counter a surge in foreign money into the country that also has fueled inflation. Last month, the central bank installed several curbs on overseas borrowing by Indian companies and ordered banks to hold more cash in reserves.

But Gupta said the central bank can do little to stem the flow of money from other sources.

"A lot of inflows have been in the form of foreign direct investment and investments in stocks and bonds,” he said. "Those inflows will continue.”

Foreign institutional investors have bought US$10.1 billion in Indian stocks and bonds so far this year, according to the Securities and Exchange Board of India. That money is on top of a record US$16 billion India received as foreign direct investment in the last fiscal year that ended March 2007.

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