Indian Rupee below 40 a US Dollar
Today, at the very early hour, the Indian Sensex crossed the 16,000 mark, a 9 year high since May 1998, to bring down the Rupee below 40 against the US Dollar. At 9:45am, the partially convertible rupee was at 39.99/40.00 per dollar after having strengthened to as much as 39.88 before giving up some of its gains.
Last Tuesday, the US Federal Reserve lowered its federal funds target rate by 50 basis points to 4.75% raising India’s interest rate premium over the US to 300 basis points, which traders said would attract more capital inflows and add to the rupee’s upward momentum.
Foreign funds have been a key driver for the rupee. They have bought about $1 billion so far this month taking their net purchases so far in 2007 to nearly $9.4 billion. It is about time that the RBI to intervene aggressively to stem the rupee’s rally. This may not be such a good news for day-traders; nonetheless, it will serve as a respite to businesses, specially small to mid firms, who earns their incomes through the Dollar. The RBI bought $11.4 billion in intervention in July, when the rupee was last near current levels, taking its dollar purchases in 2007 to $38.1 billion.
The US Subprime crisis is perhaps also one of the key factor in pushing up the Rupee against it doubled by the fact that the West is pumping in money in India, and other Asian regions.
Tags: America, dollar, India, mortgage, rupee, sensex, subprime, USA
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