Mumbai: The rupee snapped a four-day rally that had taken it to its highs for 2009, falling on Tuesday on a lack of direction from the share market and in the face of broad dollar strength.
The partially convertible rupee pared its losses in late trade to end at Rs47.02/03 per dollar, off a low of Rs47.24 but still 0.2% weaker than Monday’s close of Rs46.94/95.
On Monday, the rupee rose to a high of Rs46.89, its strongest since 19 December, before suspected central bank intervention halted its rise just ahead of a seven-month high.
“The rupee recovered some early losses after action in other Asian currencies, and also due to some comments on a supranational currency from Kremlin,” said Madhusudan Somani, head of foreign exchange trading at Yes Bank.
The leaders of the world’s biggest emerging markets may discuss the idea of a supranational currency this month when they meet for a summit in Russia, president Dmitry Medvedev’s spokeswoman said on Tuesday.
The rupee had fallen in early trade as the dollar gained against major currencies and local shares turned negative, but then trimmed losses as shares ended slightly positive and the dollar’s momentum waned.
The dollar index, a gauge of the US unit’s performance against six major currencies, was down 0.4% after being up as much as 0.8% earlier in the session.
Indian shares eked out a 0.2% rise on Tuesday after spending most of the day in negative territory as resistance emerged after a near 85% rally since early March.
Foreign investors have been investing heavily in stocks since March, a key factor in the rupee’s 11 percent rise from its record low of Rs52.2 hit early in that month.
Foreign funds have purchased a net $4.5 billion worth of shares in 2009, after having pulled out more than $13 billion last year.
“Things continue to stay good for rupee,” said J. Moses Harding, head of global markets at IndusInd Bank.
“With stocks expected to do well and euro expected to strengthen, the focus would shift to 46.80-46.50 with eyes and ears on RBI,” he said, referring to the Reserve Bank of India.
One-month offshore non-deliverable forward contracts were quoting at 47.12/22, a little weaker than the onshore spot rate.