Rupee below 42 mark vs Dollar

The rupee crossed the 42 mark against the dollar on Monday on the back of strong capital inflows even as Finance Minister P. Chidambaram said that the Indian currency was competitive despite the sharp appreciation this year.

The rupee rose by 1.4% to 41.9050 against the dollar as of the 5 p.m. close in Mumbai. The Indian currency rose as high as 41.85 today, the strongest since June 1998. On Friday, the rupee closed at 42.51/52 per dollar -- its strongest since April 6, 1999.

The partially-convertible currency is one of the top 10 gainers among the world's most-actively traded currencies this year, rising 5.4%, spurred partly by strong capital inflows and partly due to liquidity crunch.

Exporters continued to sell dollars, while importers stayed on the sidelines hoping for cheaper dollar/rupee rates. Meanwhile, the central bank was virtually absent in the foreign exchange market today.

Although importers may enter at the current levels a few of them will prefer to await for better rates. The Reserve Bank of India (RBI) may also intervene and absorb dollars, to curb the rapid rise in the rupee.

"The rupee appreciation is because of the large inflow of capital," Chidambaram said. "The rupee is still very competitive relative to other currencies."