Mumbai: The rupee posted its biggest weekly gain since early January and closed at its strongest level in more than six weeks buoyed by gains in regional currencies and dollar selling by offshore players.
The partially convertible rupee closed at 45.60/61 per dollar, its strongest since 19 January, and 0.4% above its previous close of 45.80/81.
The rupee has gained 1.1% on the week, its best since a 1.9% rise seen in the week to 8 January.
“There were some dollar flows seen today, but there was good demand from oil firms, which prevented sharper gains. Offshore guys seem far more bullish on the rupee, there was good selling from them as well,” a senior dealer with a European bank said.
Dealers said the US non-farm payroll data and comments from Greece Prime Minister George Papandreou, who is visiting Berlin on German Chancellor Angela Merkel’s invitation, would set the tone for the dollar and other majors next week.
Gains in regional peers also boosted sentiment for the rupee, they added.
The Malaysian ringgit hit a six-week peak on Friday after the central bank raised interest rates, while the South Korean won climbed on better-than-expected US retail sales and a drop in jobless claims.
Dealers said stake sale in NMDC due next week would be crucial for the rupee’s direction as good foreign demand was anticipated at the sale.
The government is set to sell shares in state-run miner NMDC, the country’s largest iron ore producer, to raise about $3 billion in an offer from 10 to 12 March.
Shares posted the best weekly gains in 2010 as they closed 0.1% higher, taking cues from a rise in global equities, with banks leading the rally, but concerns over stretched valuations limited gains.
Since mid-February, foreign investors have bought shares worth a net $1.5 billion. Last year, record inflows of $17.5 billion had helped the rupee gain 4.7% on year.
Traders said the rupee looked set to gain further boosted by easing risk aversion seen in global markets.
“Interest rate differentials have yet to gain influence in driving Asian currencies. As interest rates rise relative to the US, rate differentials are likely to gain importance,” economists at Credit Agricole said in a research note.
“Higher rates will eventually support further Asian forex appreciation,” they added.
Credit Agricole expects the rupee to rise to 42 per dollar by September 2010, before further gaining to 41 by end December.
One-month offshore non-deliverable forward contracts were at 45.59/69, little changed from the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX closed at 45.70 and 45.6975 respectively, with the total traded volume on the two exchanges at about $5.6 billion.