Sunday, April 22, 2007

India's rupee hurts exporters

India's rupee is showing new muscle as it scales nine-year highs against the dollar, alarming exporters who sell most of their goods to the United States. India's Federation of Indian Export Organisations says the appreciation of the rupee has "severely eroded the profitability of exporters." The partially convertible rupee has risen by around 11 percent against the dollar since last July, helped by inflows from investors eager to invest in India's booming economy. "Its appreciation reflects the underlying strength of the Indian economy and, of course, (broad-based) dollar weakness," said Deepak Lalwani, director at London-based Astaire Securities. But until lately, dealers say, the central bank had been intervening by selling rupees to make sure the Indian currency does not rise too quickly, and to keep a lid on export prices. Now though, market players say, the Reserve Bank of India (RBI) has eased off from intervention as it seeks to wrestle down inflation in Asia's fourth-largest economy, which is growing by around nine percent. "The bank has its eye firmly on (capping) inflation," said DK Joshi, principal economist at Indian credit rating agency Crisil.


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