Mumbai: The rupee eased on Tuesday as some foreign banks bought the dollar cheaper locally to sell at a higher rate in the offshore non-deliverable forwards market and take advantage of the price differential.
The partially convertible rupee ended at 46.89/90 per dollar, about 0.2% weaker than Monday’s close of 46.78/79. It moved in a range of 46.70 to 46.9150 on Tuesday.
“It was more of NDF related dollar demand in the near-term forward market. A lot of short dollar NDF contracts were unwinding today, so a cheaper rate in local forwards was ideal for the arbitrage,” said a senior dealer with a private bank in Mumbai. The one-month offshore non-deliverable forward contracts were quoted at 47.10, higher than the one-month forward rate of 47.04. “This gap narrowed by end of trade as more and more people were buying dollars in the onshore forwards,” the trader said.
In the overseas market, the Australian dollar rallied on an upbeat assessment of the global economy by the Reserve Bank of Australia (RBA), while the Swiss franc touched a three-month peak versus the US dollar.
The index of the dollar against six major currencies was 0.3% lower at the time of the close of local trade.
The RBA held its key interest rate at 4.5% on Tuesday, saying policy was appropriate given caution in global markets even as it remained optimistic about the outlook for Asia and the domestic economy.
The Bombay Stock Exchange (BSE) Sensex ended nearly 1% higher, supported by improved rainfall and stronger global equities. Foreign funds have invested a net of $6.8 billion in Indian equities so far in 2010.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX ended at 47.05 and 47.0475 respectively, with the total traded volume on the two exchanges at $5.7 billion.