Red-hot rupee scales 39.85 against dollar

VERY soon, Mumbai’s bookies will be betting on the rupee. How far can it go? A spiralling currency has already baffled CFOs, forced small exporters to hedge the currency risk for the first time, and driven software biggies to sell analysts the story of how they have covered their books. The paranoia will only rise in the weeks to come. A day after Ben Bernanke threw a long rope to the stock market, the rupee breached the psychological mark of 40 to touch 39.85 against the dollar — a nine-year high. On Thursday, it closed at 39.89, after opening at 40.18 level. The rupee and interest rate benchmarks are already hot bets in the over-the-counter derivatives market in several countries. In the non-deliverable forward market, international investors were even more bullish on the rupee. Such trades are expected to grow in the coming months. Though volumes are yet to pick up, rupee futures are already trading on the Dubai exchange. The trouble isn’t over. Bankers and treasury managers expect the rupee to rise to 39.50 levels in the near term, and 38.50 by December 2007 — a level last seen in the late 90s. In all likelihood, the government, which is already in election mode, will feel the pressure to extend more fiscal sops to exporters. At present, euro and rupee billing by exporters are a fond hope, since very few Indian exporters have the clout and bargaining power to convince overseas buyers to accept a currency they may not be comfortable with. A weak dollar seems to be a globally-pervasive phenomenon. For instance, on Thursday, the Canadian dollar was trading on par with the US dollar — an exchange rate that was last seen in 1976.