Rupee rises by 106p on hopes of fresh $ flows

Mumbai: Rupee gained 106 paise against the dollar on Tuesday to close at 54.37 as global markets bet that the European Central Bank would ease rates and local markets expected fresh dollar flows from foreign investors.      Following Tuesday's gain, the rupee has appreciated by almost 2.77 against the greenback in four trading sessions which is almost a 5% gain. Dealers said that the currency has never bounced back so suddenly and sharply. "The weakening trend has now broken, unless something drastically negative happens on the Euro front. I don't see the rupee coming down significantly," said Ashish Vaidya, head of fixed income commodities and currency trading at UBS. According to Vaidya, the rupee could trade in the 52-54 range for a few months.      Dealers are also looking at the extent of enthusiasm foreign institutional investors will display in Wednesday's auction of investment entitlements for foreign investors in government and corporate debt. RBI has relaxed the investment ceiling for foreign investors and has also allowed new classes of investors such as sovereign wealth funds to invest in bonds. Successful bidders will have to use up their entitlements within 45 days in the case of government debt and 90 days for investing in corporate paper. There were also rumours that State Bank of India would raise $1 billion of debt which would add to the supply.      "The first one-and-half percentage point gain we saw in the rupee was because of the exit of speculators. It was evident that the rupee was oversold when it had crossed 57 as a market rumour of the central bank opening a dollar window for oil companies saw the rupee shoot up by 60 paise within minutes," said K N Dey director Basix Forex. He adds that the rupee would get support from an improved balance of payments as oil prices have come down and imports have dipped.      Although the Reserve Bank of India has repeatedly said that it would intervene whenever there is excessive volatility, dealers said that there was no news of dollar buying by the central bank. However, manyfeel that if the current trend continues RBI may buy dollars to build back the forex reserves that it had drawn down in recent weeks.      According to a Crisil report, there is a two out of three chance that the rupee could gain to 50 against the dollar by March 2013 and one of three that it would be in the range of 55-57. "On the domestic front, the key underlying assumption is that the government will initiate some credible policy measures to revive growth, which will improve investor appetite. This would be accompanied by an easing of the current account deficit to 3.6% of GDP in 2012-13 (from 4.2% in the previous year) as global crude oil prices soften and gold imports decline." According to Dey, although the rupee has brought relief to importers exporters could still get decent earnings because of the premium in the forward markets.  Sensex erases gains on rain woes  Mumbai: The sensex on Tuesday erased most of its early gains and closed just 27 points up amid niggling worries over deficient monsoon. After climbing to a 10-week high of 17,527 in the first hour of trade, the index pared most gains and closed barely 0.15% higher at 17,426. AGENCIES