Mumbai:The rupee strengthened by 1% on Wednesday, on stocks rally, but it was not enough to pull a weekly run of gains to an eighth as refiners bought dollars to pay for imports.
The partially convertible rupee settled at Rs50.04/05 per dollar, stronger than its previous close of Rs50.52/53. However, it snapped a seven-week rise and dropped 0.5% on the week.
The market is closed on Thursday and Friday for holidays.
Sudarshan Bhat, chief currency trader at state-run Corporation Bank, said month-end import payments by oil refiners kept a lid on the rupee’s rise.
“Due to election-related uncertainties the rupee is unlikely to appreciate very sharply. The dollar-rupee could open below 50 on Monday, and is seen rangebound between 49.50 to 50.25 in the near term,” he said.
Indian shares rose 3.65%, powering gains in April to 17.45% in their best monthly performance in 10 years as a wave of improved investor confidence swept across the world.
Foreign investors moved more than $1.4 billion into domestic markets during 1-27 April, and helped the rupee rise 4.3% from its record low of Rs52.20 hit in early March.
Dealers said the dollar’s losses against major currencies were also a key factor boosting rupee sentiment. The dollar index, a gauge of the US performance against six major currencies, was down 0.8%.
One-month offshore non-deliverable forward contracts were at 50.14/24, weaker than the onshore spot rate.
“A continued recovery of the Indian currency depends largely on global economic developments, as the modest gain could be easily erased by a return of risk aversion that triggers capital outflows,” Sherman Chan, an economist with Moody’s Economy.com, said in a note on Wednesday.