Re Hits 2-Year High as Dol­lar In­flows Likely to In­ten­sify

Higher real in­ter­est rate to at­tract over­seas in­vestors to In­dia debt assets

The Economic Times - - Companies: Pursuit Of Profit - Con­tin­ued on COM­MODI­TIES & FI­NANCE

Mumbai: The ru­pee hit a two-year high af­ter ex­porters sold their for­eign-cur­rency re­ceiv­ables on ex­pec­ta­tions that pos­i­tive real in­ter­est rates would in­duce fur­ther buy­ing of Indian debt assets by over­seas funds, hard­en­ing the lo­cal cur­rency in the bar­gain. Theru­pee­gained­about0.60%or38­paisato closeat63.70,thelevel­last­seenonJu­ly23two years ago. The Re­serve Bank is be­lieved to have in­ter­vened to curb the lo­cal unit’s sharp rise. An en­gi­neer­ing con­glom­er­ate and an IT com­pany were seen sell­ing dol­lars heav­ily. “A lot cor­po­rate (dol­lar) sell­ing has emerged trig­ger­ing a rally in the cur­rency mar­ket,” said Ashish Vaidya, head of trad­ing at DBS Bank. “They were ear­lier wait­ing for a cru­cial level to be breached be­fore they cover their re­ceiv­ables.”

“We may see con­tin­ued in­ter­est in the In­dia’s debt in­vest­ment with a rea­son­ably higher real in­ter­est rate woo­ing over­seas in­vestors,” he said.

A real in­ter­est rate is the re­turn savers or in­vestors ob­tain af­ter ad­just­ing for in­fla­tion. The­re­al­rateis­thenom­i­nal­ratemi­nus­in­fla­tion. Dur­ing the day, the ru­pee hit a high of 63.60 to the dol­lar af­ter the Re­serve Bank an­nounced its bi-monthly pol­icy main­tain­ing its stance as ‘neu­tral’, which lim­its fur­ther rate cut pos­si­bil­i­ties. “The cur­rency mar­ket was a bit ap­pre­hen­sive of the RBI”s stance,” said Anindya Baner­jee, an­a­lyst at Ko­tak Se­cu­ri­ties. “With a ‘neu­tral’ stance, RBI is un­likely to cut the pol­icy rate fur­ther this fis­cal year. This will help keep the real in­ter­est rate higher, a key trig­ger for for­eign port­fo­lio in­vestors bet­ting big on do­mes­tic debt se­cu­ri­ties.” (In­verted scale)

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