Rupee recovers from 2-week low tracking dollar

Rupee recovers from 2-week low tracking dollar
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First Published: Wed, Oct 27 2010. 05 10 PM IST
Updated: Wed, Oct 27 2010. 05 10 PM IST
Mumbai: Rupee recovered from a two-week low on Wednesday as the dollar gave up some of its gains versus major currencies while weak domestic shares did little to dent hopes for more foreign capital inflows.
The partially convertible rupee closed at Rs44.445/450 per dollar, little changed from Tuesday’s close of 44.435/445 Tuesday. The unit had dropped to as low as 44.64 in early deals, its weakest since 12 October.
“The dollar gave up its gains versus majors in the afternoon, that actually helped lift the rupee off its lows,” said Vikas Chittiprolu, a senior foreign exchange dealer with state-run Andhra Bank in Mumbai.
The dollar rose broadly on Wednesday as speculation the US Federal Reserve would take a gradualist approach to more quantitative easing next week prompted players to liquidate some short dollar positions.
However, the index of the dollar against six major currencies was up only 0.3 % when the rupee market closed after having been up as much as 0.6 % earlier in the day.
“There was some $500 million inflow with a U.S. bank and later some dollar sales by a few state-run banks helped the rupee too,” a senior foreign exchange dealer with a state-run bank said.
He said there was good dollar buying by state-run banks which prevented a further rise in the rupee.
Oil refiners, the largest buyers of dollars in the local currency market, stepped up their dollar purchases for import payments due at the end of each month.
Traders expect the rupee to weaken towards 45 next week when Coal India begins to refund excess subscriptions for its $3.5 billion IPO, which had attracted institutional orders for about $27 billion mainly from foreign funds.
They said the unit could likely trade in a 44.40-44.70 range on Thursday and watch shares and major currencies for direction.
Weak world equities and a fall in financials pack on rate hike worries dragged Indian shares 1.1 % lower on Wednesday, their second straight decline.
Foreign funds have bought shares worth a record $24.7 billion so far in 2010, in addition to last year’s $17.5 billion.
One-month offshore non-deliverable forward contracts were quoted at 44.88, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, MCX-SX and United Stock Exchange closed at 44.88, 44.88 and 44.87 respectively, with the total traded volume on the three exchanges at about $7.8 billion.
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First Published: Wed, Oct 27 2010. 05 10 PM IST
More Topics: Markets | India | Rupee | Dollar | Currency |