Mumbai: The rupee pared its fall to a one-week low on Wednesday as a sharp turnaround in the share market perked up demand and forced traders to cover short positions in the currency taken earlier in the session.
The partially convertible rupee ended at Rs50.19/20 per dollar, off an early trough of Rs50.67, its weakest since 1 April, but still weaker than its previous close of Rs50.04/05.
“The stocks’ recovery was the turning point for the rupee today,” a trader with a state-run bank said.
Indian shares fell 3.4% in morning deals but then made a stunning reversal to end the day up 2% at their highest close in nearly 6 months.
Foreign capital is a key driver of the rupee, and the stock market is a key influence on flows.
Over the first three trading days of April when the stocks market rose 8.5% and the rupee strengthened to six-week highs, foreign investors bought more than $270 million of shares.
But they have sold a net $1.4 billion of stocks so far in 2009, after dumping more than $13 billion last year. The rupee is down 3% this year, after shedding 19.1% in 2008.
One-month offshore non-deliverable forward contracts were quoting at 50.39/49, weaker than the onshore spot rate.