Rupee pares losses as dollar falls, stock markets rise

Rupee pares losses as dollar falls, stock markets rise
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First Published: Tue, Jun 16 2009. 11 25 PM IST
Updated: Tue, Jun 16 2009. 11 25 PM IST
Mumbai: The rupee recovered some of its early losses on Tuesday, helped by a sharp fall in the dollar versus major currencies and a rise in the domestic stock market, which raised hopes for more foreign fund inflows.
The rupee closed at 47.74 per dollar, off an early low of 47.95 and marginally weaker than its previous close of 47.71.
“Stocks recovered after initial selling and some dollar inflows were also seen,” said Jai Prakash, a senior dealer at state-run Andhra Bank.
Shares climbed 0.55%, led by State Bank of India, as some long-term investors saw value in the market after it shed almost 4% over three days.
Foreign fund flows into shares have been a key driver for the rupee in recent years. Overseas investors have bought around $7.8 billion worth of shares since mid-March, helping the rupee climb 9.3% from its record low of 52.2 hit on 3 March. The dollar index, a gauge of the US unit’s performance versus majors, was down 0.9%, after what was seen as dollar-negative comments from Russia.
Before a Bric summit later in the day, Russian President Dmitry Medvedev said the world needs new reserve currencies, which traders took as signals that it may be looking to cut the share of US assets in its currency portfolio. Brazil, Russia, India and China make up the Bric nations.
One-month offshore non-deliverable forward contracts were quoting at 47.91-48.01, weaker than the onshore spot rate, indicating a slightly bearish outlook in the near term.
Meanwhile, India’s bonds fell, reversing earlier gains, on speculation investors will demand higher yields to buy bonds the government is selling this week. The government plans to raise as much as Rs15,000 crore at an auction on 19 June, including Rs5,000 crore of 6.49% bonds due in 2015.
The yield on the 6.07% note due May 2014 rose four points to 6.67% in Mumbai, according to the central bank’s trading system. The price fell 16 paise per Rs100 face amount, to 97.53.
Bloomberg contributed to this story.
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First Published: Tue, Jun 16 2009. 11 25 PM IST
More Topics: Rupee | Dollar | Currency | Markets | India |