Rupee may strengthen against dollar

Last Updated: Wed, Nov 28, 2012 05:36 hrs

The rupee is expected to strengthen from current levels against the dollar during the week, driven by capital flows, said currency dealers. Capital flows are expected as global rating agency Moody’s said on Tuesday that India’s rating outlook was stable.

Moody’s attributed it to the country’s strong economic growth along with high savings and investment rates. “India’s Baa3 rating and stable outlook are supported by credit strengths which include a large, diverse economy, strong GDP growth and savings, and investment rates that exceed emerging market averages,” the agency said in its ‘Credit Analysis on India’ report.

A forex dealer with a large state-run bank said Moody’s statement would help to attract flows during this week. That will support the rupee against the dollar. “In the last seven days, capital flows slowed, compared with the demand for dollars. Now, it will improve,” the dealer said.

On Tuesday, the rupee found support in early trades as it opened at Rs 55.60 against yesterday’s close of Rs 55.73 per dollar. The rupee had dropped to the lowest level in almost three months before a report this week that is forecast to show growth will remain near a three-year low. On Tuesday, the rupee ended at Rs 55.46 against the dollar, after touching an intra-day high of Rs 55.44.

“I feel due to capital flows the strengthening will continue for some more time,” said Akhil Thomas, assistant manager (treasury), Federal Bank. The trading range for the rupee will be Rs 55-55.7 against the dollar this week, he said. But, another forex dealer with a public sector bank said the major factor driving the rupee would be from the winter session of Parliament.

According to forex dealers, month-end dollar demand is making it difficult for the rupee to appreciate significantly.

Most of the dollar buying is coming from public sector banks to cater to the needs of oil importers, said dealers.

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