Strong demand, dwindling inflows fuel dollar’s bull run

The dollar has fast-tracked regaining its lost ground as it reached closer to Rs285 in the interbank market after hitting its lowest in the middle of October. Amid drying up inflows coupled with strong demand from importers, the greenback maintained its bull run by gaining Rs7.7 or 2.8 per cent in the last 10 sessions. Currency experts counted several reasons which ended the rupee’s winning streak. According to bankers dealing in the interbank market, the short supply of dollars was the main reason for the changed sentiment. However, many believe that inflows fell to a lower level. The market also observed that the hopes for foreign investments from the Middle East have vanished after the Israeli attacks on Gaza. At the same time, market experts see no big inflows even if the IMF releases the second tranche under the $3bn Stand-By Arrangement. The talks with the IMF are positive so far. “The latest violence by terrorists in the country could further destabilise the political and economic environment and a kind of uncertainty has emerged over the future of economic trends,” said a senior banker. The government is sure about the economic stability but the growth in the economy is still fragile.