Rupee cuts gains on dollar strength, weak shares

Rupee cuts gains on dollar strength, weak shares

Mumbai: The rupee erased all intraday gains to end almost steady on Wednesday, dragged down by strong overseas dollar and weak local stocks.

The partially convertible rupee ended at 46.90/91 per dollar, after rising to 46.82 earlier, and stronger than its 46.91/92 close on Tuesday when it had hit 46.98, its weakest since 12 August.

“It remained rangebound and almost stable today. I expect the rupee to rebound to 46.60 level soon," said A.D.M. Chavali, general manager of treasury and resource management at state-run Bank of Baroda.

The index of the dollar against six major currencies reversed its earlier downward trend to trade 0.4% higher.

The yen pulled back from 15-year highs against the dollar on Wednesday on speculation Japanese authorities may take active steps to stem the currency’s rise. The euro also came off its session high against the dollar of $1.2725 and was at $1.2621 around local market closing time.

“There is no negative for the rupee now. Oil is steady and there is hardly any upward pressure on oil prices," Chavali said.

Dealers expect the rupee to move in 46.75-46.95 band on Thursday with a strong bias given the recent depreciation.

Indian shares ended 0.72% lower, knocked down by world equities.

Share moves are watched for direction of capital flows. So far in 2010, foreign funds have bought a net $12.6 billion worth of shares, adding to last year’s record $17.5 billion inflow when the rupee had gained 4.7%.

One-month offshore non-deliverable forward contracts were quoted at 47.10, weaker than the onshore spot rate, suggesting a bearish near-term outlook.

In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were both at 46.93, with the total traded volume on the two exchanges at about $5.6 billion.