Rupee weakens from two-year peak

The rupee slipped from its highest level in more than two years against the dollar, as local stocks fell and the US currency recovered some of the lost ground against major international rivals. The rupee also fell as domestic oil refiners bought dollars to buy crude oil, and other Asian currencies declined. Traders and dealers are also closely watching the Reserve Bank of India (RBI), which had bought dollars to stem the rupee's strength on Oct 14. The partially convertible Indian currency ended at 44.59 per dollar on Friday, after touching a week's low of 44.60 and week's high of 44.1275. It had closed at 44.1050 on Oct. 15. The rupee fell 1% this week. Last Friday it had risen to 43.96, its highest since August 2008.



But, the rupee could resume its recent ascent as foreign capital inflows will increase amid a slew of big-ticket public issues, including some of the top state-run companies such as Power Grid Corp., SAIL, IOC, etc. Coal India, the world’s largest producer of the commodity, raised as much as Rs151.30bn (US$3.4bn) in India’s biggest IPO this week with total demand coming in at US$54bn. Local companies have raised a record Rs806bn in equity and rights issues this year.

Reliance Industries Ltd., the nation’s largest company by market value, last week raised US$1.5bn in dollar-denominated debt. It may be recalled that recently, the Government had doubled the FII limit in government and corporate bonds. SBI is raising Rs. 10bn selling 15-year bonds with a coupon of 9.25%, which is at least 125 basis points higher than the 10-year benchmark government bonds. Infrastructure Development Finance Corp. (IDFC) and L&T Infrastructure are seeking to raise about Rs. 40bn. Both these bonds have tax benefits for up to Rs. 20,000 investment, but yield at least 125 basis points lower than SBI’s.