Mumbai, July 3 (IANS) The rupee rose to a seven-week high of 54.36 against a dollar Tuesday as some clarity on taxation rules and the measures announced by the government to attract overseas investments boosted confidence in the Indian currency.
The partially convertible rupee rallied for the fourth trading sessions in a row. It closed 1.07 percent higher at 54.36, the highest level in seven weeks.
The rupee has rebounded sharply after hitting a record low of 57.33 against a dollar June 22.
The finance ministry proposal that the controversial general anti-avoidance rules (GAAR) would not be applicable on participatory notes, through which many foreign investors invest in India, boosted foreign investors confidence in the markets.
The guidelines also calls for a monetary threshold for implementation of GAAR.
The Reserve Bank of India’s (RBI) move to hike overseas investments limit in government bonds also sent a positive signal to the market and helped revive the battered currency.
Research firm CRISIL said in a report that the Indian currency was likely to strengthen to 50 against a dollar by the end of the currency financial year.
“CRISIL Research, in the base case scenario, expects the rupee to appreciate to around 50 per dollar by March-end 2013,” CRISIL said in the report.
“We assign two-in-three chance to this event,” it said.
The key underlying assumptions include the initiation of some domestic policy measures to revive growth, no further worsening of our expectation of growth and inflation and an easing of current account deficit due to softening of crude and commodity prices – all of which could improve investor appetite.
Some improvement in the Eurozone situation in the first quarter of 2013 is also accounted for, which will stimulate return of capital flows into Indian markets.
