The Indian rupee rose toward a nine-year high on Wednesday after the US Federal Reserve cut rates sending stocks higher across Asia, but dollar buying by state-run banks and a local company trimmed some gains.
MUMBAI: The Indian rupee rose toward a nine-year high on Wednesday after the US Federal Reserve cut rates sending stocks higher across Asia, but dollar buying by state-run banks and a local company trimmed some gains.
The Fed lowered on Tuesday the benchmark federal funds target rate by 50 basis points to 4.75 percent from 5.25 percent.
It also cut the discount rate it charges for direct loans to banks by a half-point to 5.25 percent. At 9:49 am, the partially convertible rupee was trading at a two-month high of 40.3132 per dollar, up nearly half a percent from Tuesday's close of40.4849.
The unit rose as high as 40.26 in opening trades, within sight of a nine-year peak of 40.20 in July.
"They (state run banks) came in around the 40.25-30 levels, but it is difficult to say whether it is on behalf of the central bank," said a local trader.
"A steel company was also seen mopping up dollars around those levels.
Asian currencies such as the Indonesian rupee and the Philippine peso rose more than 1 percent each against the dollar, while major stock indices across the region surged after the US cut revived appetite for high-yielding assets.
Equity inflows have been a key driver for the rupee. Foreigners have bought about $1.1 billion of Indian stocks in September, taking their net investment to nearly $9.5 billion in 2007.
The 30-share BSE index climbed to a record high above 16,000 points in early trade.
But analysts are worried the central bank may intervene around 40.20 levels to protect exporter margins.
The central bank had bought $38.1 billion in the first seven months of this year to keep the rupee from appreciating too fast.
According to a JP Morgan index the rupee was overvalued by nearly 16 percent, compared with 6 percent a year ago.
"With oil above the $82 per barrel mark, the rupee may have already done its best for the day," said a foreign bank trader.
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