Mumbai: The rupee extended gains for the second straight day, tracking Asian peers and some dollar inflows, but strong dollar demand from state-run banks on behalf of oil importers kept a lid on the rupee’s upside.
“I think the dollar demand by oil importers is for payment to Iran. But some (dollar) inflows are expected towards the Tata Steel issue today and tomorrow from institutional investors,” said a dealer at a foreign bank.
Oil is India’s biggest import and refiners are the largest buyers of dollars in the domestic currency market.
Tata Steel, the world’s seventh-largest steelmaker aims to raise as much as 34.77 billion rupees ($768 million). The company raised Rs508 crore from 33 anchor investors on Tuesday. The share sale will close on Friday.
At 11:04am, the partially convertible rupee was at Rs 45.33/34 per dollar, up from Tuesday’s close of Rs 45.42/43. It is expected to move in Rs45.25-45.45 band intraday, traders said.
Choppy domestic stocks kept the rupee in a range. Indian shares flip-flopped in early trade, underpinned by firm Asian markets.
Foreign funds are net sellers of $710 million worth of shares in the year to Monday after pumping in a record $29.3 billion in 2010.
“The view on the rupee has changed now. People are no longer bullish on rupee as we saw quite bit of outflows this year. Also, India has a large current account deficit compared with other Asian countries,” said another foreign bank dealer.
Strength in Asian units along with a weak global dollar helped the rupee to hold on to its gains in early trade.
The dollar slid to a two-month low against a basket of currencies on Wednesday, as continued short-covering in the euro helped spur a broad fall in the dollar. [USD/]
The index of the dollar against six major currencies was down 0.44 percent at 78.615 points. Most Asian currencies were stronger than the US dollar on Wednesday.
One-month offshore non-deliverable forward contracts were quoted at 45.65, 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 the MCX-SX were both at 45.4250, while on the United Stock Exchange the contract was at 45.4275. Total traded volume on the three exchanges was about $1.3 billion.