Mumbai: The rupee bounced off seven week lows on Friday, cheered by gains in the euro versus the dollar, but choppy domestic shares continued to raise worries about sustained foreign fund withdrawals.
The partially convertible rupee closed at Rs 45.6150/6250 per dollar, off the day’s low of Rs 45.77, its weakest since 1 December, but still 0.2% below Rs 45.53/54 at close on Thursday. The rupee dropped 0.5% on the week.
“The euro’s rise helped the rupee retreat from 7-week lows today but heard some corporates were buying dollars,” said A. Ajith Kumar, a senior foreign exchange dealer with Federal Bank.
The euro rose to a two-month high versus the dollar on Friday, helped by Asian demand and improving confidence in the euro zone, but its rally was on shaky ground as it approached key technical resistance.
The dollar index, a measure of the greenback’s performance against six major currencies, was down 0.3% at 78.586 points when the rupee market closed.
“There was some oil buying in the market along with corporate demand in the morning. Next week the rupee may trade in a range of Rs 45.35 to 45.90,” Kumar added.
Oil is India’s biggest import and refiners are the largest buyers of dollars in the domestic currency market.
Traders said a choppy domestic share market raised concerns about sustained foreign fund withdrawals, which could pressure the rupee downwards.
Indian shares ended the week higher after two weeks of decline, but shed 0.2% on Friday, weighed down by software majors after investors fretted over the exit of two senior personnel at Wipro.
So far in 2011 until Thursday foreign funds were net sellers of over $900 million worth of shares pushing the rupee down 2%. Last year, investments had reached a record $29.3 billion helping the rupee rise 4.1%.
One-month offshore non-deliverable forward contracts were quoted at Rs 45.92, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, MCX-SX and United Stock Exchange closed at 45.6725, 45.6850 and 45.68, respectively, with the total traded volume on the three exchanges at an average $6.8 billion.