Mumbai: The rupee ended strong but off highs, on the back of robust dollar inflows, positive local shares and a weak dollar overseas. However, month-end dollar demand from state-run companies prevented a sharp rise in the Indian unit, dealers said.
“There are huge external commercial borrowings, qualified institutional placement related dollar inflows. Exporters are covering their 3-12 month receivables,” said J. Moses Harding, head of global markets at IndusInd Bank in Mumbai.
The partially convertible rupee ended at Rs 45.225/235 per dollar, off the day’s high of Rs 45.15, but 0.5% stronger than Monday’s close of 45.47/48.
Harding expects the rupee to move in Rs 45.00-45.35 band for rest of 2010.
Foreign funds had dumped a net $588.61 million worth of shares so far this month until Monday. Total net foreign fund inflows so far in 2010 stand at $28.4 billion, on top of the $17.5 billion invested last year.
“Oil importer dollar demand at lower levels kept the rupee’s gains checked,” said Vikas Chittiprolu, a senior foreign exchange dealer with state-run Andhra Bank.
Indian shares rose for the third straight session and closed 0.9 percent higher on Tuesday, helped by firm world equities and investor optimism surrounding next year’s prospects.
Global dollar weakness also helped the rupee rise.
The euro pared gains against the dollar in thin trade on Tuesday after ratings agency Moody’s put Portugal on review for a possible downgrade, reinforcing worries that the euro zone’s debt crisis would persist well into 2011.
“I think euro is heading towards $1.335-1.35 in the near term to push rupee into 44.85. Foreign fund inflows will be good on shift into the new year. There are no signs of unwinding ahead of year end,” IndusInd Bank’s Harding said.
The index of the dollar against six major currencies gave up some losses and was down 0.19% at 80.471 points at local market close time.
The one-year forward dollar premium ended up at 241.50 basis points compared with Monday’s 234 basis points as foreign investors were hedging their debt purchases by paying forward dollars.
One-month offshore non-deliverable forward contracts closed at Rs 45.44, weaker than the onshore spot rate.
In currency futures, the most traded near-month dollar-rupee contracts on the National Stock Exchange, MCX-SX and on United Stock exchange closed at 45.2950, 45.2950 and 45.2925, respectively, with the total traded volume on the three exchanges at a low $4.8 billion.