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Rupee Reaches 5-mth High

The Indian currency jumped on foreign inflows and weakening dollar

While the Indian stock markets have hit a wall after the post-poll results declaration sparked irrational exuberance that culminated in Monday's gain of over 2,100 points on the Sensex, yet there is one aspect of the Indian financial world that is strengthening by the day, day after day.

We are referring to the rupee which has climbed up from its lowest ever levels to under Rs 47 to the dollar today, which is a five month high. Also, while the markets managed to rise on Monday and have thereafter been falling or remaining range-bound, the rupee has been rising for six consecutive days, enabling the Indian currency to reach the level it was last on 19 December, 2008.

The increased capital inflows into India as a result of the Congress-led UPA getting a chance to form the government, which has been interpreted as being friendly towards the markets as well as on expectations of major reforms happening on various fronts, has been the driver of this change. While the markets have definitely benefited, the rupee itself being able to sustain its upward march is significant as it indicates a graeter confidence in the currency -- that the US dollar is sliding in international markets is helping the cause too.

However, after hitting the day's high, the Rupee softened to Rs 47.14 later in the morning.