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Moderate $ demand, Kargil cooldown strengthen rupee; Rs 42.85

The rupee gained by seven paise at the interbank foreign exchange market today as dealers discounted the possibility of a direct Indo-Pak conflict.

The rupee's rally was also encouraged by reports that the Indian armed forces had gained an upper hand on the Pak-backed infiltrators in Kargil by ousting them from many occupied posts along the line of actual control.

Opening at Rs 42.86/88, the rupee showed a range-bound movement of Rs 42.83-42.88 during the day and eventually ended at Rs 42.84/85. The previous close was Rs 42.91/93.

''The dollar supply was sufficient to absorb the moderate demand,'' said a dealer. News that India had accepted a Pakistani offer to send their foreign minister to this country also aided the positive sentiments.

''The Pakistani offer is seen as a conciliatory gesture and recedes the possibility of an open war between the two countries,'' opined a senior dealer with a local bank.

The forward premia closely tracked the spot-dollar movement were quoted lower compared to the last session. The monthly premia (in paise) were 15-17 for June, 31-34 for July, 51-54 for August, 71-74 for September, 90-93 for October, 112-115 for November, 134- 137 for December.

The six-month annualised premia ended at 5.36 per cent.

There was no cash/spot as the New York market was closed for memorial day.

The Reserve Bank of India fixed the reference rate at Rs 42.84 a dollar as against the previous fix of Rs 42.99.

The rupee ended at Rs 68.63 a pound sterling, Rs 35.25 a yen and Rs 44.79 a euro.

UNI

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