Broker's Notes: Rupee surges on foreign fund buying

The Indian rupee strengthened past 45 per dollar on Monday, its highest level in four-and-half months, boosted by sustained foreign fund buying of local shares and aided by broad losses in the dollar. The dollar's losses against major currencies also helped. Foreigners have pumped $4.5 billion into Indian shares this month, taking net investment so far in 2010 to $17.4 billion. The inflows had lifted the rupee 1.3 percent last week, its best rally in three months.

The pound rose to a seven-week high against the dollar on Monday, with markets citing sterling demand related to dividend payments from UK banks. Sterling hit a high of $1.5853, up around 0.2 percent on the day. The pound also gained versus the euro which fell 0.3 percent to 84.98 pence.

Gold breached the psychological resistance $1,300 an ounce on Monday, with investors pouring more cash into the market on global economic health worries and the possibility of further quantitative easing to stimulate growth. Silver, often considered the poor man's gold, rose to a 30-year high as investors also chased a cheaper alternative. The metal has gained nearly 30 percent this year. Fund managers and industry experts say gold's rally has further to run in the longer-term as it provides a hedge against inflation amid expectations that central banks worldwide could resort to quantitative easing to support their economies.

The euro took slipped lower on Monday after hitting five-month highs against the dollar late last week but losses were limited as the greenback remained under pressure on expectations of more U.S. monetary easing. Euro also seems to be facing some profit-taking against the dollar after gaining 6 percent on the dollar this month and hitting its highest since April on Friday at $1.3496 but traders saw potential for further gains. Latest data from the Commodity Futures Trading Commission showed currency speculators moved to a net long position in the euro for the first time this year.

According to the media sources the European Central Bank sold 6.2 tonnes of gold in the past year, the lowest in 11 years, as a sovereign debt crisis gripped the continent. Sales fell 96 percent in the CBGA's year to September which expired on Sunday, the report said, citing provisional data. It was the lowest since the Central Bank Gold Agreement was signed in 1999, and down from the peak of 497 tonnes in 2004/2005, according to the report. European central banks are unlikely to sell much more gold in the new CBGA year, according to a survey. Annual sales under the pact are limited to 400 tonnes, down from 500 tonnes in the second agreement, which expired in late September. Sales under the new pact, which started in September 2009 and expires in September 2014, have been low.

Oil was steady on Monday, trading close to a two-week high near $77 reached earlier, as energy and commodities regained the favour of investors with a weaker dollar, rising equities and resurfacing risk appetite. Data from the Commodity Futures Trading Commission reveals that trader cut net-long crude oil positions on the New York Mercantile Exchange to less than 97,000 in the week through Sept. 21 from almost 114,000 a week earlier. That means the number of people betting for higher prices decreased over the period, and the turnaround in prices at the end of last week on the back of positive economic data created incentives to revert those positions.
 

Source: Richcomm Global, Dubai