Mumbai: The rupee snapped a five-day winning streak on Wednesday, falling as demand for the US dollar from importers weighed and as a seesawing sharemarket failed to provide clarity on the outlook for fund flows.
The partially convertible rupee closed at 48.51/52 per dollar, off an early high of 48.45, which was its strongest since 24 August and 0.1% weaker than its previous close of 48.46/47.
“There was good two-way interest in the market today and it was largely just mirroring moves in the local sharemarket,” a senior dealer with a private bank said.
Domestic shares extended gains to a fourth straight session, but the rise was limited on concerns that the prices may have risen a little too fast.
The dealer said some correction may be seen in local shares over coming days. A fall in shares could weaken the rupee on expectations that foreign investors could withdraw funds.
Foreign investors have bought $8.6 billion of stocks so far this year, helping the rupee claw back from record lows of 52.2 hit in early March. Last year outflows of more than $13 billion pushed the rupee down by a fifth.
The dollar edged lower on Wednesday after sharp selling in the previous session, hovering near the year’s lows against a basket of currencies, and traders said demand from Indian oil and sugar importers weighed on the rupee.
“We hold on to 45.50/dollar target for the rupee by year-end, heading into Q4, risk should get another leg up, flows should also pick up,” said Priyanka Chakravarty, forex strategist at Standard Chartered Bank.
One-month offshore non-deliverable forward contracts were quoted at 48.52/62, little changed from the spot rate.
In the currency futures market, the most traded near-month contracts on the National Stock Exchange and MCX-SX closed at 48.5625 and 48.5650 respectively, with the total traded volume on the two exchanges at about $2.1 billion.