Mumbai: The rupee snapped a two-day fall on Tuesday, having touched a two-month low in the previous session, tracking strong Asian currencies and a bounce in the euro. But, choppy local shares weighed on sentiment.
“Though the view of the rupee weakening in the next 2-3 weeks have not changed, most of the market is sitting on long dollar/rupee position, which they may cut and that may also help in rupee gaining today,” said a foreign bank dealer.
High inflation, weak domestic equities, and a wide current account deficit have mainly kept foreign investors on the sidelines this year, leading to dealers taking a bearish view on the Indian unit.
Foreign funds were net sellers of $1.19 billion worth of shares last month until 28 January. Last year, investments had reached a record $29.3 billion.
“The trend of slow capital inflows is likely to continue given the global factors like Egypt, US economy recovering, and high oil prices,” said another foreign bank dealer.
At 9:52am, the partially convertible rupee was at Rs 45.83/84 per dollar, stronger than its Rs 45.90/91 close on Monday, when it had touched 46.01 -- its lowest since 30 November.
Dealers expect the rupee to move in Rs 45.75-45.95 band intraday.
Dollar purchase by oil importers and subdued dollar inflows could put downward pressure on the rupee. US crude futures steadied above $92 on Tuesday, taking a breather after surging to a two-year high in the previous session on the unrest in Egypt and rising demand expectations.
Shares turned negative after opening up on Tuesday in flip-flop trade.
The euro crept back near a two-month high on Tuesday after a jump in euro zone inflation fuelled expectations of a rate hike and as worries about unrest in Egypt abated slightly.
The dollar index, a measure of the greenback’s performance against six major currencies, was down 0.21% at 77.569 points.
One-month offshore non-deliverable forward contracts were quoted at 46.10, 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 were all at 46.0450. Total traded volume was $597 million.