India starts to revalue currency like that of China – Indian currency six year high against US Dollars – play fair game and create domestic jobs
Sudhir Chadda
Jun. 12, 2005

India is finally forced to take some action on the currency front like that of China. Both India and China has started the base work to make their currency floatable in the open market. That is only way to practice open trade between countries and continents.

According to media reports, China contemplating revaluation of its currency, the Yuan, vis-à-vis the US dollar, today strengthened the Indian currency to a six-year high of Rs 43.28 per dollar in foreign exchange market, Mumbai.

Analysts are debating over the extent of possible revaluation of Yuan; whether it would be barely three per cent or 10 per cent.

The Yuan was pegged against the US dollar in 1995 at an exchange rate of 8.3 per dollar. Foreign exchange dealers were of the view that the Chinese currency could appreciate by 7.5 per cent to 10 per cent so that export growth of China comes down from 35 per cent to 10 per cent or below.

The USA is believed to be keen on Yuan becoming stronger. The Indian forex market welcomed the move to revalue Yuan as it would help domestic exports.

At the same time, forex dealers expect the Reserve Bank of India to intervene if the rupee becomes too strong against the American greenback.

Stock market analysts gave another reason for the strengthening of the Indian rupee. They say the impending inflow of dollars by way of Satyam Computers’ American Depository Shares (ADS) could be as high as $280 million considering an ADS price of $21.50 per unit.

Another IT major, Infosys has also been planning ADS in due course that could easily fetch another $1 billion. These factors have contributed to make the Indian currency stronger.

These ADS have ignited banks’ interest in dollars, market sources said. The rupee at 4.30 pm this afternoon was quoted at Rs 43.29 per dollar which was an appreciation of 35 per cent.


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