The Indian rupee surged in late trade to its highest in more than nine years on Wednesday, as foreign fund flows into a surging stock market trumped suspected central bank intervention, dealers said. The partially convertible rupee rose to 39.55 per dollar, its highest since April 1998, climbing smartly from an intraday low of 39.90.
It ended at 39.575/585, up from Monday's finish of 39.85/86. Markets were closed on Tuesday for a holiday. "The dam broke as soon as the market pushed the rupee past 39.70: a lot of people rushed in and sold dollars then," said a senior dealer with a private bank, referring to the Reserve Bank of India's persistent efforts to block the rupee's ascent.
Indian shares hit a 10th straight record high and posted an 11th consecutive rise on Wednesday - matching a similar run of gains in September and October 2003.
The central bank was seen selling rupees to keep it below 39.70, but was absent once the level was breached, dealers said. India will review a limit on intervention bonds if asked by the central bank, Finance Minister Palaniappan Chidambaram said on Wednesday, and analysts said the ceiling would have to rise at least by a third if the rupee's rise was to be checked. The central bank spent $38.1 billion in the first seven months of 2007 to slow the rupee's rise.
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