The Indian rupee eased from this week's nine-year high on Wednesday, as investors pared positions in the local currency after a cabinet minister expressed concern that a rising rupee was denting export growth.
The partially-convertible rupee ended at 40.92/93 per dollar, briefly falling below the 41 mark during the session, and slipping from Tuesday's close of 40.8000/8150. The rupee hit a nine-year high of 40.53 on Monday. "It was the Kamal Nath effect that hurt the rupee today," said a dealer with a private bank, referring to India's trade minister.
"But the moment it started nearing 41, there were plenty of exporters looking to sell dollars." A spokesperson for the trade minister said on Wednesday he had written to Indian Prime Minister Manmohan Singh seeking intervention to limit the surging rupee, whose strength was hurting exporters' competitiveness.
The rupee has gained more than 8 percent this year, with most of the gains coming in the past two months, boosted by capital inflows into the fast-growing economy. Foreign funds have bought more than $2.9 billion worth of stocks so far in 2007.
India's exports grew a slower-than-expected 8.8 percent to $12.58 billion in March from the same month a year ago as the impact of the rising rupee started hurting exports. Traders said that there was good support for the rupee when its approached the 41 per dollar mark, as exporters found those levels attractive to sell dollars.
"There's still plenty of steam left in the rupee, and there are plenty of people who think the rally is far from over," said a trader with a private bank.