We’ve seen the highs and lows of Rupee with it reaching Rs/$ = 39 mark and also depreciating to Rs/$ = 52 in March 2009. Now again it is on an appreciating spree. Since March 2009 last year it has now reached on the verge of breaking the Rs/$ = 45 mark. Till the time this blog was written the currency exchange rate was Rs/$ = 45.7. According to Business Line Rupee forwards in the non-deliverable forward (NDF) market are trading at a discount to spot rate resulting in arbitrageurs becoming active in the Indian currency, thus contributing to the current up-move. Moreover, given excellent equity returns in the Indian Stock market compared to global indices, FII inflows have been very positive which has also led to rupee appreciating. BSE gave a 70% return in 2009. Although, the dollar has been trading strong against other major currencies over the last fortnight but it has not made any headway as strong economic data brought back risk appetite stunting the greenback’s gains.

Such an appreciation has implications for companies whose revenues are dependent on exports. One such sector is the IT sector which is already facing the lows due to less business given the recent financial turmoil. Companies like Reliance, Hindalco, Tata Steel which have a significant portion of revenues from exports might take a hit.

According to Business Line in the intermediate term, trend in the currency is up and it can move to 45.2 or even 44 over the medium term. In the short term of 5 day span the rupee can spend a few sessions moving in the zone between 45.8 and 46.5. Rally above 45.8 can take rupee to 45.2.

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