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Rupee edges up on shares rally before poll results

Rupee edges up on shares rally before poll results
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First Published: Sat, May 16 2009. 12 19 AM IST
Updated: Sat, May 16 2009. 12 19 AM IST
Mumbai: The rupee gained on Friday as domestic shares rallied on hopes the ruling coalition could secure support to retain power, although trade was cautious ahead of the weekend release of election results.
The partially convertible rupee closed at Rs49.41/42 per dollar, 0.7% stronger than its previous close of Rs49.78/79. However, the rupee ended down 0.25% on the week.
“The rupee rose tracking the stock market rally and hopes of UPA/Congress coming back to power,” said J.Moses Harding, head of global markets at IndusInd Bank in Mumbai.
“Think 49.20/30 should hold with oil and month-end demand. However, if UPA has to scout around for support from Third Front, we might see rupee back into 49.60-80/50.0 range,” he added.
A month-long voting process ended on Wednesday, and results will be released on Saturday. Exit polls show a lead, but not a majority, for the ruling Congress-led UPA.
The easing political worries saw shares snap a two-day fall and rise 2.5%, lifting the market to a 10th successive weekly gain for the first time in two-and half years.
The stock market has rebounded over half from its March lows, mainly powered by a revival in global risk appetite. Foreign funds have moved $1.9 billion into Indian stocks so far this month, after net buying of $1.5 billion in April.
Those inflows have helped lift the rupee 5.6% from a record low of Rs52.2 in early March.
“Overall, rupee behaviour will depend on offshore flows into equities. If foreign institutional investors start pulling out, it would be a danger,” Harding said.
India’s foreign exchange reserves rose to $255.941 billion as on 8 May, from $251.702 billion a week earlier, Reserve Bank of India data showed.
One-month offshore non-deliverable forward contracts were quoting at 49.68/78, weaker than the onshore spot rate.
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First Published: Sat, May 16 2009. 12 19 AM IST
More Topics: Rupee | Dollar | Markets | India | Currency |