Rupee surge on Fed rate cut, breaches 40 mark
Weekly wrap up: Rupee surge on Fed rate cut, breaches 40 mark The Indian Rupee dropped on September 17, as traders squared open postions followed by US Federal Reserve`s decision on cut interest rates. The sensitive index slipped into the negative, touching a low of 15,467.46 in the intraday trades. The BSE Sensex fell 0.64%, or 99.37 points, to close at 15,504.43. There was nervousness among the investors on uncertainty about the Federal Reserve decision on cut in interest rate and the pattern of investment inflows. The investors took a pause from investing in the local domestic market for a while. Indian Rupee closed at 40.56/57 a Dollar, nearly a quarter percent down from Friday`s close of 40.45/46. The local currency reversed its mode on September 18, on inflow of capital in the Indian bourses with possible Fed cut. There was speculation that the US Federal Reserve will cut its interest rate by 25 basis point which aroused the investors to invest in the local market. The Indian rupee ended at 40.48/49 a Dollar, up nearly half a percent from the day`s low of 40.65 and up from Monday`s close of 40.56/57. The local unit on September 19, continued its rally towards the north after the Fed cut rates by 50 basis point in the Federal Reserve Open Market Committee (FOMC) meeting. Optimism spread among the emerging markets, as investors increased their appetite to invest in local market. The BSE Sensex rose 4.17%, or 653.63 points, to close at 16,322.75. To halt the Rupee`s momentum, the apex bank intervened by purchasing Dollars to prevent exporters from incurring losses. Indian Rupee closed up at 40.20/21 a Dollar as against Tuesday`s close of 40.48/49 on firm local bourses. Indian Rupee continued to surge on September 20, putting pressure on central bank, as exporters have been the worst hit. Fed cut has brightened the prospects of h igher yielding assets such as Rupee that crossed the level of 40 on Thursday. Investors also invested in long-term investments that led the local bourses to cross the level of 16,000 mark on strong inflow of capital. On the other hand, the central bank intervened in the forex market to cap the gains by purchasing Dollars. This refrained the Rupee from surging, giving some relief to exporters. Rupee ended at 39.89/90 a Dollar, up 0.7% from Wednesday`s close of 40.20/21. The local unit reversed its mode on September 21, as the central bank intervened in the forex market to cap gains by buying Dollars, despite the rise in demand for the high yielding currency. The move was aimed to aid the exporters from incurring losses in their business. Further, oil importing companies had put forth demands for more Dollars on wake of surging crude oil prices to meet the demand of the domestic market. But Rupee promises to be strong in the nea r future as long term effects of sub-prime crises are yet to be seen. Indian Rupee closed down at 39.90/91 a Dollar, as against Thursday`s close of 39.89/90.
