Mumbai: The rupee fell on Wednesday, weighed by the US unit’s gains against major currencies, but bounced back from more than a 1-month low helped by some recovery in shares and on dollar sales by a large corporate.
The partially convertible rupee closed at 44.9350/9450 per dollar after hitting 44.9850, its lowest since 31 March, and 0.7% weaker than its 44.61/62 previous close.
“It was a big day today. A large corporate sold dollars and brought the rupee up from the lows. Stocks’ weakness hurt, but once Europe opened, it pushed risk higher, taking out the stops,” said Nitesh Kumar, an inter-bank dealer with Development Credit Bank.
“I think keeping a stop-loss at 45, one can short the dollar at 44.90,” he added.
Indian shares dropped for the third day as they shed 0.3% to their lowest close in nearly two months as fears of Greek contagion continued to spook world markets stoking investor risk aversion.
However, shares recovered after having dropped as much as 1.6% during the session. Dealers said they would continue to monitor the stock market performance for cues on the direction of foreign fund flows, which are crucial to the rupee’s fortunes.
So far in 2010, foreign funds have invested a net $6.6 billion in domestic shares. In 2009, record inflows of $17.5 billion had helped the rupee gain 4.7%.
One-month offshore non-deliverable forward contracts were quoted at 45.07, weaker than the onshore spot rate.
Onshore dollar premiums edged down across tenors as a weaker spot rupee prompted exporters to receive forwards, with a drop in overnight indexed swaps also pushing them lower.
One-year onshore dollar premium dropped to a low 131.25 points compared with 136 points at previous close and six-month premium fell as much as 68.75 points versus previous close of 72 points.
“Spot dollar/rupee was up, which was pushing premiums lower,” said Ashtosh Raina, head of foreign exchange trading at HDFC Bank in Mumbai.
Madhusudan Somani, head of forex desk at Yes Bank said there were also a lot of exporters selling dollars at higher levels in the forwards market which pushed down premiums.
However, the dollar’s broad gains weighed on the rupee. Fear that a euro zone debt crisis may spread beyond Greece sent the euro below $1.29 for the first time in more than a year and rattled bond markets in Portugal and Spain, while U.S. jobs data boosted the dollar.
The index of the dollar against six major currencies was up 0.5%. Most Asian currencies too weakened against the dollar.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX closed at 45.0325 and 45.03 respectively, with the total traded volume on the two exchanges at a high $8.5 billion.