New Delhi: The rupee recovered from a drop to a five-week low on Tuesday, ending stronger as dollar sales by exporters outweighed concerns about the sustainability of capital inflows.
The partially convertible rupee ended at Rs48.53/55 per dollar after falling to Rs48.90, its lowest since 15 May, in early deals, to be stronger than its previous close of Rs48.62/63.
“With equity markets around the world tumbling, there is concern about dollar inflows,” a dealer with a private sector bank said.
Indian shares fell 2% early on Tuesday as investor confidence across Asia was dented by renewed concerns about the global economy but pared losses to end flat.
“The rupee ended up partly because of stocks rebound and it was a good level for exporters to sell,” said another trader.
Foreign portfolio flows into stocks of about $7.5 billion since mid-March have been a key driver for the rupee, but the fall in the stock market since 10 June has weakened support.
Dealers expect more dollar inflows when foreign funds invest in upcoming share sales by some Indian companies.
A comment by a senior economic policy maker that a delayed monsoon would not affect the economy much also helped sentiment.
One-month offshore non-deliverable forward contracts were quoting at 48.65/48.75, weaker than the spot rate.
A dealer said the rupee was likely to trade in a 48.25-75 range over the next few days, with the market waiting for the release of the 2009-10 budget on 6 July.
Analysts estimate the fiscal deficit will be revised up from a forecast of 5.5% of gross domestic product made in the interim budget in February, raising borrowing needs and keeping the pressure on interest rates.