Mumbai: The rupee strengthened on Tuesday, pulling away from a seven-week low as sentiment was boosted by an increase in risk appetite, gains in the sharemarket and the dollar’s weakness against major currencies.
The partially convertible rupee closed at 46.66/67, 0.4% stronger than its close of 46.83/84 on Monday, when it had dropped to a seven-week low of 46.8650.
“The rupee gains today were mostly due to the euro’s movements. Some risk-taking is coming back into the market,” said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.
“Not sure if this is likely to continue, as there is still some more room for upside to the dollar till about 46.95”.
The euro extended its recovery from its recent 8 1/2-month low against the dollar on Tuesday on market speculation that a bailout would be organized for Greece soon, prompting a squeeze of vulnerable short positions.
Dealers said the dollar’s moves against other majors were likely to set broad direction for the rupee over the week. The index of the US dollar against six majors was down 0.2%.
“Gains in the equity market also helped today,” a senior dealer with a private bank said.
“Trading however was rangebound and is likely to be so, just like in other markets globally as investors oscillate between risk aversion and risk appetite,” he added.
Shares climbed 0.7%, stretching gains to a third day as European and Asian markets saw some respite from recent pressure, but the outlook remained uncertain.