Mumbai: The rupee rose in late trade on Wednesday as exporters sold the dollar to cash in on their holdings of the US unit, but a weak domestic share market prevented a sharper rise.
The partially convertible rupee closed at Rs49.11/13 per dollar, 0.2% stronger than Tuesday’s close of Rs49.20/22.
“There is still some good resistance at Rs49.25 and so there is some dollar selling interest at those levels. If the dollar further appreciates against the majors, then the rupee would depreciate and test Rs49.60-49.95 levels soon,” said L. Subramanian, chief dealer at ICICI Bank.
Other dealers said state-run banks sold dollars around Rs49.25, which helped the rupee rise in late trade.
Shares fell 3.5% on Wednesday to their lowest close in seven weeks as investors cut positions ahead of key earnings and on rising risk aversion among foreigners.
Foreign fund flows have been a key factor determining the rupee’s fortunes in recent years. Foreigners have already sold about $660 million worth of local shares in 2009, after having dumped more than $13 billion last year.
The domestic currency is down 0.8% this month, after having fallen 19.1% in 2008.
The dollar’s rise against other major currencies overseas also weighed on sentiment for the rupee.
Sterling tumbled on Wednesday, hitting a 7-1/2-year low against the dollar, as intensified risk aversion drove investors back into the US currency which reached its strongest levels against the euro in six weeks.
One-month offshore non-deliverable forward contracts were at Rs49.32/42, suggesting a weak outlook for the local unit.