Mumbai: The rupee retraced from three-week lows but ended weak on Friday as oil importers’ dollar demand, losses in local shares and global dollar strength outweighed support from dollar inflows towards debt.
All eyes are now on the US non-farm payroll data due at 1330 GMT for directional cues. A surprise increase in US private sector job creation in December raised hopes of stronger non-farm payrolls figures, helping lift revised forecasts to 175,000 from 140,000 earlier.
The partially convertible rupee ended at 45.38/39 per dollar, after touching 45.48 -- its weakest since 20 December -- and below its Thursday’s close of 45.245/255. It moved in 45.3250-45.48 band intraday.
Despite weak stocks, dollar sales from foreign institutional investors (FIIs) were marginal.
“There has been some interest from FIIs into debt and ECB (external commercial borrowing)-related inflows which has prevented the rupee from weakening sharply,” said Rohan Naik, head of forex trading at Standard Chartered Bank in Mumbai.
Indian shares ended 2.4% lower on Friday, notching up a loss for the first week of the year, on deepening concerns the central bank might raise interest rates soon to rein in galloping inflation.
Foreign funds have bought shares worth $201.88 million in the first four trading sessions this year. The rupee had gained 4.1% in 2010 on record $29.3 billion foreign fund inflows.
Stanchart’s Naik expects the rupee to maintain a weakening bias next week and even breach 45 on likely overall global dollar strength. “The US dollar is expected to continue to be on a strong footing. I think $1.2950 in euro is a very crucial level,” Naik added.
The dollar rose to a four-month high versus the euro and a one-month high against a basket of currencies on Friday ahead of US jobs data.
The dollar rose against a basket of major currencies to 81.076 its highest since early December.
Also, despite the improved dollar supply, purchase of the greenback by oil importers weighed on the rupee.
“Oil importer dollar demand came at around 45.35 levels while exporters came close to 45.40 levels to sell dollars, thereby keeping the rupee in a range,” said a dealer at a foreign bank.
One-month offshore non-deliverable forward contracts were quoted at 45.67, 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 the United Stock Exchange were at 45.55, 45.555 and 45.5575, with the total traded volume on the three exchanges at a moderate $6 billion.