Mumbai: Rupee strengthened in early trade today helped by a rise in Asian stocks, which fuelled expectations of some foreign fund inflows into the local shares, and a drop in oil prices.
At 9:30am, the partially convertible rupee was at Rs49.76/79 per dollar, 0.2% stronger than Thursday’s close of Rs49.87/89. It had hit a record low of Rs50.65 on Tuesday.
“The rupee opened weaker due to the Delhi airport firing rumours, but then gained tracking positive Asian markets and lower oil,” a senior dealer at a private bank said.
“Operations appeared normal at New Delhi’s international airport early on Friday,” a Reuters witness said, despite media reports of a shootout there.
Oil prices have fallen to their lowest since Jan 2005. Down more than $100 a barrel from a record high hit in July, the fall in oil is seen helping rupee sentiment as it would help contain India’s widening trade deficit.
Indian stocks had surged 5.5% on Thursday, and Asian markets were up again on Friday. Japan’s Nikkei was up 0.5%, South Korea’s Kospi had put on nearly 2% and the Sanghai Composite index was down 0.3%.
Foreign fund flows have been a key factor for the rupee’s direction in recent months. Capital outflows worth a net $13.8 billion from Indian shares so far in 2008 have helped push the rupee down 21% against the dollar.
Dealers said that the market had largely factored in an interest rate cut, which is expected to be announced on the weekend. The central bank governor has scheduled a media conference for noon on Saturday.
“A rate cut would be positive for the economy, so it would be positive for the rupee,” said Agam Gupta, head of forex trading at Standard Chartered Bank.
“I expect the rupee to be in a Rs49.70 to Rs50.20 range today,” he said.