Mumbai: The rupee was little changed on Thursday after a weak start as mild gains in domestic shares helped steady the market, but the outlook was tepid with high oil prices spurring demand for dollars.
Oil is India’s biggest import and refiners are the largest buyers of dollars in the domestic currency market.
Brent crude approached $103 after violent clashes in Egypt raised the prospect of further unrest across the west Asia, overshadowing the bearish effect of soaring gasoline inventories in top consumer the United States.
“There has been strong buying of dollars throughout this year from oil importers. This should continue even today and will pull the rupee further down,” said a dealer at a foreign bank.
At 10:10 am, the partially convertible rupee was at 45.63/64 per dollar, after easing to 45.65 in early trade and little changed from Wednesday’s close of 45.62/63.
Dealers expect the rupee to move in 45.55-45.80 range.
Indian shares, which have fallen 11.5% this year, were up 0.8%.
“Even if there are (dollar) inflows, they won’t be much to have an impact on the direction of the rupee,” said a dealer at another foreign bank.
Foreign investors have pulled out $1.5 billion from Indian shares since the start of January following high inflation and rate increases, and the escalation of violence in Egypt could hasten the withdrawal as risk aversion grips global investors.
The euro paused below a 12-week peak on Thursday, though hawkish comments from the European Central Bank later in the day could give it fresh impetus to test resistance around $1.3950.
The euro was at $1.3787. It had risen above $1.3860 overnight, its strongest level since early November but retreated later.
Local stocks and euro will be the key drivers for rupee in the day, dealers said.
The dollar index, a measure of the greenback’s performance against six major currencies, was up 0.01% at 77.162 points.
One-month offshore non-deliverable forward contracts were quoted at 45.85, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange were all at 45.7975 with the total traded volume at $540 million.