The Indian rupee touched a new nine year high against the US Dollar, anticipating huge foreign inflows into the country due to the DLF IPO and the ICICI Bank fund raising exercise. ICICI Bank will be raising 20,000 crores while the DLF IPO will raise about 10,000 crores. Hence there would be thousands of crores worth of US Dollars coming into the country, increasing the demand for the Indian rupee. The Indian rupee ended the day at 40.40 after touching a new nine year high.
The rupee touched a record high against the dollar, today. For the first time in a decade, the Indian rupee has crossed the Rs. 41 per dollar mark. The Indian rupee is in the middle of a very strong bull run. The appreciating rupee is causing a lot of problems for exporters and Indian software companies. However, Mr. Reddy in an interview yesterday, made it clear that the RBI has no plans to intervene in the near future. For the RBI, the rising rupee is fine but the rising inflation is not. Hence, to prevent inflation, RBI has decided not to intervene and stop the rupee from appreciating further.
The Indian rupee touched a new nine year high on Tuesday, ahead of the RBI announcement on key rates. This surge is because investors bet on renewed capital inflows into the rapidly growing Indian economy. The Indian economy has been recieving huge foreign direct investment as well as foreign institutional investment which has led to record dollar reserves and the record rise in the value of rupee against the dollar.
This morning the Indian Rupee was trading at 41.58/59 per dollar after touching a high of 41.55 which was its highest level since May 1998. It had closed at 41.67/68 on Monday. The Indian rupee has appreciated by about 6% in the year 2007, making it the best performing Asian currency against the dollar, this year. The next best performer is the Thai baht, which has appreciated by about 3.6% against the dollar.
The surging rupee is a boon for importers and a bane for exporters. The Indian software (IT) industry in particular seems to be the worst affected.
The Indian rupee has risen to 41.72, which is its strongest level against the dollar since May 1998. This will lead to a huge drop in profit margins for Indian IT companies. Markets have realised this and already the IT stocks have been beaten badly.
In anticipation of the rise in rupee, all the major Indian software companies have gone in for some protection. TCS is said to have obtained a $1 billion hedge at a price range range of 43.50 - 44. Infosys Technologies has a forex cover of $ 470 million. Currency risk can be mitigated in 2 ways. The most common way is to hedge, by selling dollars future and buying rupees through the rupee dollar futures market. The other way to mitigate risk is by buying put options. However, both these methods have their own “costs” attached with them.
The rupee gave up early gains to end firm on Monday(09 April), in volatile trading that saw unwinding of long dollar positions toward the close. It touched an intraday high of 42.76 per dollar which is the highest since May 1999