Mumbai: The rupee ended stronger on Tuesday, recovering from a fall to a two-week low as the stock market rose and the dollar reversed earlier gains against major currencies, but remained down sharply so far this week.
The partially convertible rupee closed at Rs48.45/46 per dollar, 0.2% stronger than its previous close of Rs48.56/59. The rupee had dropped 1.4% on Monday, its biggest fall in three months, on disappointment with the government’s budget.
On Tuesday, the currency hit a low of Rs48.75, its weakest since 23 June, and a high of Rs48.27.
“Rupee was tracking the stocks and cross currencies today. The outlook seems a bit dicey for now, but we may see a range of 48.25-48.55 tomorrow, while it may trade in a 48-49 band for the next one month,” said Naveen Raghuvanshi, an associate vice president with Development Credit Bank.
“There seems to be good technical resistance at 49, if it breaks that, then we may see it going further lower,” he added.
The Bombay Stock Exchange 30-share index, the Sensex, rose 0.9% as investors looked to growth opportunities, a day after the market fell nearly 6% on worries about a growing budget deficit and increased government borrowing needs.
The dollar index, a gauge of the US unit’s performance versus six major currencies, was down 0.2% after having risen 0.4% earlier, and dealers said moves in the euro would offer further cues for the rupee.
Dealers said any cut to India’s sovereign ratings or outlook would be a big negative for the rupee, although rating agencies have said no change was imminent after the budget.
“The further deterioration in government finances coupled with lack of clarity on the divestment program/foreign direct investment could result in rating agencies re-visiting the currency sovereign rating/outlook,” Citigroup economists said in a report.
“On the currency, while current sentiment is weak, movements in the US dollar are key, and the rupee is likely to continue to oscillate between ‘risk aversion’ and ‘return to risk’,” they said.