China’s inflation reached a 16- month high, industrial output climbed and new loans exceeded forecasts, adding to the case for the government to pare back stimulus measures. Consumer prices rose 2.7 percent from a year earlier, the National Bureau of Statistics said in Beijing today, compared with the 2.5 percent median estimate of 29 economists surveyed by Bloomberg News. A weeklong holiday may have boosted prices. Production expanded 20.7 percent in the first two months of the year after an 18.5 percent gain in December. With economic growth quickening to more than 10 percent and record lending flowing through the financial system, economic overheating is a high possibility. The government will stay very proactive this year and an inflation rate approaching 3 percent or topping the target may trigger an interest-rate increase. Rupee opened at 45.4400/4500 against its previous closing of 45.3800/3900 and expected to trade in 45.3000/45.5500 Range today.
The Indian rupee weakened slightly in early trade today, as the dollar\'s gains versus major currencies overseas and a choppy start in domestic shares underpinned sentiment. Market is expecting a good response to the follow-on share sale to raise upto $2.6 billion in state-run NMDC and if the markets expectations prove to be true then the Rupee should be able to break the support at 45.30 comfortably. It is also important to watch out for the RBI if the rupee appreciates quite sharply, especially around the previous highs of 45.30 levels. There is a possibility that RBI may intervene, like other Asian central banks that have also intervened in the last three days and RBI may also follow suit.
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