Mumbai: The rupee edged up on Thursday closely tracking gains in shares and the euro, but a sharp rise was averted as investors were cautious ahead of a statement from the European Central Bank (ECB) president.
The partially convertible rupee closed at 46.96/97 per dollar, 0.1% stronger than its close of 47.02/03 on Wednesday. It moved in a band of 46.88-47.10 during the session.
“The market is quite undecided and is waiting for some trigger to move. Some positive statements are expected from (ECB president Jean-Claude) Trichet, which is why the rupee gained a bit in late trade,” said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.
“The outlook for tomorrow really depends on Trichet’s statements and the euro’s moves overnight,” he added.
The European Central Bank kept its main interest rate on hold at a record low of 1% for the 13th month running on Thursday, as expected by economists.
Markets will now turn their attention to ECB president Trichet’s news conference at 1230 GMT, when he will explain the decision and whether the ECB will use further tools to help the financial system and the economy at large.
The Bank of England kept interest rates at a record low of 0.5% on Thursday, as expected, ahead of the new government’s 22 June budget, which will detail the extent of fiscal tightening Britain faces.
“There wasn’t much impact of the BoE decision as it was on expected lines. However, there has been some major dollar buying in the market today as despite the stocks and euro rising so much, the rupee’s gains were capped,” a senior dealer with a private bank said.
“The rupee could see some gains tomorrow. If we break below 46.90, we could see 46.60 levels,” he added.
The BSE Sensex climbed 1.6%, rising for the second day, helped by a rebound in world markets, but dealers were skeptical if the gains could be sustained as the euro zone’s ongoing fiscal woes weighed.
Foreign fund flows into and out of the share market are closely monitored as they have a large impact on the rupee’s fortunes. Foreign investors have bought a net $83.6 million so far in June, after pulling out $2 billion in May.
The euro rose on Thursday as strong demand at a Spanish debt auction eased concerns about how the country will fund its large debt. The single currency was up 0.4% against the dollar at $1.2033, steady compared with just before the decision.
The index of the dollar against six major currencies was down 0.4%.
One-month offshore non-deliverable forward contracts were quoted at 47.11, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX closed at 47.0675 and 47.07, respectively, with the total traded volume on the two exchanges at about $5.9 billion.