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Indian rupee gains but oil a concern, data awaited

Indian rupee gains but oil a concern, data awaited
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First Published: Fri, Jul 04 2008. 11 29 AM IST
Updated: Fri, Jul 04 2008. 11 29 AM IST
Mumbai: The Indian rupee edged up on Friday, 4 July, on expectations for capital flows into beaten down shares, but further gains would be limited with oil near record highs and inflation data due at noon.
At 10:20am, the rupee was at 43.25/26 a dollar, 0.1% stronger than Thursday’s close of 43.30/31. It had hit a 15-month low of 43.50 on Tuesday.
“Some inflows are expected today after Dow Jones closed positive yesterday, but high inflation could instantly reverse the sentiment on the rupee with oil still holding near record levels,” a senior dealer with a private bank said.
Rising foreign portfolio outflows, a widening trade gap and an unrelenting rise in the price of oil are likely to drive the rupee down nearly 2% in coming months, a Reuters poll showed.
India’s annual inflation rate due at noon is expected to have risen to its highest in more than 13 years in late June, driven by higher fuel prices and strong demand in the economy, a Reuters poll showed on Thursday.
India’s main share index rose as much as 0.85% in early trade, after having lost 15% in the last two weeks.
Foreign funds have sold a net $6.6 billion worth of Indian stocks so far this year. In 2007, they had bought a record $17.4 billion.
Oil steadied above $145 a barrel on Friday as the United States headed into the Independence Day long weekend, pausing after the previous day’s rally to a record near $146.
High oil prices widen India’s trade deficit, putting downward pressure on the rupee. The rupee has fallen nearly 9% so far in 2008, after having risen 12.3% last year.
One-month offshore non-deliverables forward contractswere quoting at 43.65/75, weaker than the onshore rate.
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First Published: Fri, Jul 04 2008. 11 29 AM IST
More Topics: Rupee | Dollar | Foreign Exchange | Inflation | Oil |