Mumbai: The rupee eased on Thursday, ending a two-day winning streak as the sharemarket’s momentum faded and dollar demand from state-run banks for defence and oil import payments weighed, but further gains were seen.
The partially convertible rupee closed at Rs48.68/69 per dollar, a little weaker than its previous close of Rs48.64/65. In early trade, the unit rose to Rs48.47, its highest since 7 July.
The rupee is still up 0.7% so far this week, and remains comfortably above Monday’s low of Rs49.47, which was its weakest since 15 May.
“The rupee opened with a strengthening bias today, but a large state-run bank was continuously buying dollars, which is why the rupee came off its highs,” said K. Radhakrishnan, chief currency dealer with UCO Bank.
Other dealers said various state-run banks were spotted buying dollars, probably on behalf of the government for defence-related import payments, and there was also some oil-related demand seen.
Oil is India’s biggest import and refiners are the largest buyers of dollars in the domestic currency market.
The Bombay Stock Exchange 30-share benchmark, Sensex, ended flat on Thursday after jumping 6.4% over the previous two days.
Foreign investors have bought shares worth more than $1 billion so far this month, taking their net purchases in 2009 to $6.1 billion. These inflows have been a key driving force, pushing up the rupee from record lows of Rs52.2 hit in early March.
Dealers said gains in the dollar against other currencies also hurt the rupee. The dollar gained against the euro and perceived higher risk currencies as caution ahead of key US corporate earnings left investors more averse to risk.
However, traders said offshore banks had been buying rupees over the past few sessions, indicating they remained optimistic about the local unit’s near-term direction.
“The rupee is likely to strengthen further from current levels and we could test 48.40 levels in the very near term,” UCO Bank’s Radhakrishnan said.
In the currency futures market, the most traded near-month contract on the National Stock Exchange and MCX-SX was quoting at 48.71 and 48.7250 respectively, with the total traded volume on the two exchanges at about $1.5 billion.