Mumbai: The rupee bounced back from near one-month low on Thursday, halting its slide seen this week, helped by dollar sales by exporters taking profits.
The partially convertible rupee closed at 47.21/22 per dollar, off a low of 47.6250 seen in early deals which was down 2.4% on the week, and 0.3% stronger than its previous close of 47.34/35.
The rupee came under pressure earlier on the day owing to the customary month-end dollar demand from refiners.
Oil is India’s largest import and refiners are the biggest buyers of dollars in the local market.
“The rupee weakness is in line with the correction seen in the stock market, but there was heavy dollar selling by exporters as well, which pulled up the rupee from its lows,” said Sudarshana Bhat, chief currency dealer at state-run Corporation Bank.
Indian shares continued its losing streak for the fourth consecutive day and closed 1.4% lower in volatile trade, its lowest close in nearly 8 weeks, weighed down by weakness in global equities on concerns over global growth.
Foreign portfolio inflows into local shares are a key driver for the rupee. Foreign investors have bought a net $14.4 billion of local equities so far this year, after being sellers of more than $13 billion in 2008.
“I think this rupee weakness will continue for a few more days, but the long-term bullish trend is still intact. For that trend to change, we need to effectively break the 48/dollar-mark, otherwise, we will soon see the rupee back at 46.70 levels,” Corporation Bank’s Bhat said.
Traders said the dollar’s weakness versus major units in late trade also supported the rupee’s recovery.
The euro edged higher against the dollar and the yen on Thursday as the market took a breather ahead of key US gross domestic product data which is expected to show a return to growth in the third quarter.
One-month offshore non-deliverable forward contracts were quoting at 47.23/33, largely unchanged from the onshore spot rate.
In the currency futures market, the most traded near-month contracts on the National Stock Exchange and MCX-SX closed at 47.28 and 47.2750 respectively, with the total traded volume on the two exchanges at about $3.5 billion.