Mumbai: The rupee eased on Wednesday, as a stronger dollar overseas spurred banks to sell the local unit, but a rise in local stocks checked its losses, traders said.
At 10:55 am, the partially convertible rupee was at Rs48.0725/08 per dollar, off an early low of Rs48.14, and weaker than Rs47.90/91 on Tuesday. It had touched a two-week high of Rs47.8350 in the previous session.
“The rupee’s fall was due to the cross-currency movements, specially the dollar’s gains. However, an upside in shares has limited this fall,” a senior trader with a foreign bank, said.
The dollar steadied on Wednesday, holding gains made the previous day after an unexpected fall in US consumer confidence cooled optimism about an economic recovery, prompting investors to seek safety of the greenback.
The dollar index, a gauge of the US unit’s performance versus major currencies, was up about 0.2%.
A rise in local shares on Wednesday raised expectations of capital inflows in the coming weeks, triggering a reversal of short rupee positions by a few banks.
The Bombay Stock Exchange 30-share index leapt 49.3% in April-June, its biggest quarterly gain in 17 years, on signs of economic recovery.
A net $7.3 billion of foreign portfolio inflows to local shares since mid-March have helped the rupee to rebound from a record low of Rs52.2 hit in early March.
Traders said a move by the government to relax rules for overseas borrowing did not have an impact on trading.
India on Tuesday eased overseas borrowing rules for firms to speed up work on infrastructure projects as the cash-strapped government explores ways to lift growth in a slowing economy.
After market hours, the finance ministry said it has eased overseas borrowing rules for developers of tax-free special economic zones, township projects and non-banking finance firms engaged in funding infrastructure projects.