BOMBAY, 1 April 2004 — The Indian rupee surged to a 53-month high against the dollar yesterday, breaking the key 44-rupee level despite sporadic intervention by the central bank to halt the currency’s climb, dealers said.

At noon, the Indian unit was at 43.42 to the dollar after hitting a high of 43.32 in the morning, a level last seen in October 1999. The rupee closed on Monday at 44.07.

Dealers said the apparent indifference by the authorities to the rupee’s climb had encouraged the view the central bank favors a strong rupee, which led to exporters wanting to offload the dollar.

“It is ... panic dollar selling by exporters,” said V.Rajgopal, chief foreign exchange dealer at Kotak Mahindra Bank.

“The market is volatile with the currency rising in thin volumes and wide spreads, though there were some sporadic bouts of dollar buying by the central bank.

“Probably (financial) year-end considerations would also be compounding the deals,” Rajgopal added. “Importers are still keeping on the sidelines.”

Analysts expect the rupee to stabilize after the start of India’s new financial year today.

“There is a view building that the central bank will step in from tomorrow and stabilize the dollar at around the 44.50 rupees level,” said Vasudha Khandelwal, senior analyst at forex brokerage Mecklai.

“The key economic figure for GDP (Gross Domestic Product) is also out and exporters will rein in the panic sell-offs that we have seen in the last few days.”

The country’s economy grew 10.4 percent in the third quarter, with agriculture boosted by the country’s best monsoons in a decade.

The Central Statistical Organization said the year-on-year economic growth for the three months to December was boosted by the agricultural rebound following the monsoons.

“The high gross domestic product (GDP) has been made possible by a 7.4 percent growth in the manufacturing sector and 16.9 percent growth in the agriculture, forestry and fishing sectors,” said a statement released here.

The economy posted 5.7 percent growth in the first quarter and 8.4 percent in the second quarter.

The latest data comes as good news for the Hindu nationalist-led government ahead of national elections in April.

The Indian currency has been on a sustained uptrend due in part to the dollar weakening globally, especially after the Madrid bombings.

Since January the rupee has gained nearly four percent after a rise of 5.1 percent in calendar 2003 on the back of large dollar inflows brought by foreign investors into Indian equities.

The Indian stock market rose 73 percent in 2003 after foreign investors plowed in seven billion dollars in 2003.

The currency’s steady rise in the past few weeks has also been due to a flood of foreign money into a slew of domestic equity offerings.

The government has just completed sales of stakes in six companies aimed at raising more than three billion dollars.

The sharp rise in the currency, however, has pressured software exporters, who sell about 70 percent of their output to North America and are under pressure to cut prices in the face of fierce competition.

Shares of blue-chip software firms wilted as the rupee strengthened yesterday.

On the Bombay Stock Exchange at noon, Infosys was at 4,900.30 rupees, down 137.60, Wipro lost 22.60 at 1,354.10 while Satyam was down 9.45 at 292.0.

Economists claim every one percent gain in the rupee leads to a two to three percent fall in the profits of software companies.