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Rupee ends higher at 47.90/$ as US lifts sanctions

The rupee ended firmer on Monday with sentiment helped by the withdrawal of US economic sanctions on India.

The currency closed at 47.88/90 per dollar, slightly off the intra-day high of 47.86. It has clawed back from Friday's lifetime closing low of 48.01/03.

"The lifting of sanctions and the stability in the money and bond market was a positive," a dealer with a foreign bank said.

The United States said on Saturday it was removing the sanctions on India and Pakistan, imposed in 1998 after tit-for-tax nuclear tests.

Dealers said sentiment was also helped by the relative stability in the rupee after sharp recent swings.

The rupee has been relatively stable in the second half of the past week despite edging to new lows, compared to the volatility immediately after the U.S. attacks.

"Exporters realised that the rupee is not about to fall to 48.20, so what is the point in waiting ... might as well sell (dollars)," a dealer with a state-owned bank said.

This month the rupee had fallen 1.8 per cent to Friday's close, on dollar buying by foreign funds and importers, which intensified after the US. attacks.

At current levels, it is estimated to be undervalued by around one per cent.

Traders continued to watch the developments in the region with traders perceiving a measured US retaliation against the attacks on New York and Washington two weeks ago.

Dollar forwards softened on inter-bank receiving interest as banks squared off paid positions with the rupee gaining.

The six-month annualised forward closed at 6.39 per cent compared with Friday's 7.15 per cent.

Export rate cut leaves market unmoved

The central bank lowered interest rates on export credit but this barely impacted the market.

Dollar forwards softened immediately after the news but quickly rebounded on the view that it was unlikely to be followed by a cut in the more significant bank rate which is used by commercial banks to price lending and deposit rates.

India's exports shrank to $13.61 billion in April-July from $13.86 billion a year ago, hit by a global economic slowdown, and no notable pick-up is expected from the cuts.

"Interest rates form a very small part as to why exports are not growing," a dealer with a state-owned bank said. "This move is not likely to have much of an impact on export growth."

Intra-day report

The rupee firmed in opening trade on Monday with sentiment buoyed by the lifting of US economic sanctions on India over the weekend.

"The lifting of sanctions is a boost for sentiment and it has prompted some inter-bank profit taking," a dealer with a state-owned bank said.

The rupee was quoted at 47.95/96 per dollar compared with Friday's lifetime closing low of 48.01/03. Traders said they expected the rupee to trade in a broad 47.88-48.00 range.

The United States said at the weekend it was lifting the economic sanctions imposed on India and Pakistan after their tit-for-tat nuclear tests in 1998, because the two countries had offered to support global fight against terrorism.

However, analysts said the sluggish economy would not gain much from the removal of sanctions.

Traders expect the market to be cautious due to war concerns as the United States prepares for military action against Afghanistan to flush out militant groups it believes are responsible for the September 11 attacks.

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