Mumbai: The rupee rose on Thursday as a dovish outlook in the US Federal Reserve minutes weakened the dollar to a two-month low, which triggered selling in the US currency by local exporters.
The partially convertible rupee ended at 46.60/61 per dollar, about 0.2% stronger than 46.69/70 at close on Wednesday. It moved in a band of 46.58 and 46.78 during the session.
“Today’s movement was linked to the movement of dollar to the euro and pound. I think 46.50 seems a good support for the rupee tomorrow,” said Paresh Nayar, head of foreign exchange and money markets at First Rand Bank in Mumbai.
The dollar fell after the Fed trimmed forecasts for growth in the United States this year. The minutes showed about half of US policymakers saw growth risks to the downside, with some worried about the prospect of a deflationary spiral.
The dollar’s index against six major units was about 0.5% lower at the time of the market’s close. Traders said the dollar’s weakness mostly overshadowed a fall in local share prices.
Foreign fund flows into and out of the stock market have a huge influence on the rupee’s fortunes. So far in 2010, foreign investors have purchased a net $8.3 billion worth of shares, adding to last year’s record $17.5 billion inflows.
The BSE benchmark Sensex fell 0.16% in a choppy session, in line with world markets after the Fed’s cautious stance on economic recovery.
One-month offshore non-deliverable forward contracts were quoted at 46.74, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX ended at 46.69 and 46.6950 respectively, with the total traded volume on the two exchanges at about $3.6 billion.