Mumbai: The rupee gained marginally on Friday in tandem with a sharp rise in domestic equities, but uncertainty over the euro and robust dollar demand from local oil companies limited the rise.
At 11:03am, the partially convertible rupee was at 44.93/94 per dollar, slightly stronger than its previous close of 44.96/97.
The rupee has moved between 44.9250 and 44.9700 so far in the day. Traders expect the unit to hover in a 44.85-45.00 band for the rest of trade.
“Problems in the euro zone are far from over and so the euro is unlikely to see stability for some time. And the US economy has its own problems. So, the rupee will be stuck in a band it seems,” said a senior foreign exchange dealer at a private sector bank.
The euro held steady against the dollar on Friday as a short-covering bounce stalled on lingering uncertainty about the fate of Greece’s austerity plan, with signs of money market strains also seen as a potential downside risk for the single currency.
The euro was at $1.4264, while the index of the dollar against six major currencies was down 0.27% at 75.246 points.
The index had been 75.440 points and the euro at $1.4213 when the domestic currency market closed Thursday.
On Wednesday, the US Federal Reserve kept interest rates near zero and revised downward its forecasts for U.S. gross domestic product in 2011.
The local benchmark share index rose over 1.2% on Friday tracking Asian peers, but investors await a decision on raising fuel prices that could accelerate already high inflation.
Crude oil is India’s biggest import and domestic oil refiners are largest buyers of the dollar in local forex market.
Brent crude rebounded to $108 from a four-month low on Friday as traders gauged how much supply would reach the market from an IEA-coordinated release of emergency oil stockpiles.
The one-month onshore forward premium was at 22.75 points versus 22.50 at last close. The three-month was at 72.25 points from 73 and the one-year was at 244.50 points from 244.
One-month offshore non-deliverable forward contracts were quoted at 45.14, weaker than the onshore spot rate.
In the currency futures market , the most traded near-month dollar-rupee contracts on the National Stock Exchange, the United Stock Exchange and the MCX-SX were all at 44.9575. The total volume was at $1.56 billion.