Mumbai: The rupee failed to sustain early gains to a one-week peak on Friday as concerns over the euro zone debt crisis continued to weigh on investor sentiment, but gains in shares averted a sharp slide.
The partially convertible rupee closed at 46.84/85 per dollar, off its high of 46.68, its strongest since 4 June and 0.25% above Thursday’s close of 46.96/97. The rupee closed steady on the week.
“Today has been a relatively silent day, even other global markets were quiet. Stocks did not react much to the factory data, so rupee too did not rise,” said Naveen Raghuvanshi, an associate vice president with Development Credit Bank.
India’s industrial output grew at a much stronger-than-expected pace in April, reinforcing expectations the central bank will lift rates for the third time this year at a policy review late next month.
“Dow Jones and Nasdaq futures are higher, if euro too gains to around $1.23 kind of levels, we could see some sell-off in the dollar on Monday and the rupee could open close to 46.50 levels,” he added.
Dealers said the inflation data due around 12 p.m. (0630 GMT) on Monday would be watched for cues on likely central bank moves on rate hikes.
The wholesale price index based inflation probably rose 9.56% in May from a year earlier. Forecasts from 22 economists ranged from +8.7% to +10.2%. The index rose an annual 9.59% in April.
Indian shares logged their first weekly loss in three, but climbed 0.8% on Friday, cheering the rise in world markets and robust factory data, with energy giant Reliance Industries leading the gains.
Foreign funds have been net buyers of around $84 million of equities this month, after withdrawing nearly $2 billion in May as the euro zone’s debt jitters hit risk appetite, pulling down the main index by 3.5% and the rupee by 4.3%.
“The volumes were lower today as compared to the last 15-20 days as even the global markets were ranged. Guess the rangebound trade between 46.50-47.25 will continue next week,” said a senior dealer with a private bank.
Dealers said the dollar’s moves versus majors would be closely watched for direction next week.
The euro rose on Friday on the back of higher stocks, but the single currency struggled to extend its short-covering rally versus the dollar ahead of technical resistance, while options barriers also capped gains.
One-month offshore non-deliverable forward contracts were quoted at 46.96, 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 46.9425 and 46.9375, respectively, with the total traded volume on the two exchanges at about $5.95 billion.