Rupee climbs on flow outlook, buoyant Asia

Rupee climbs on flow outlook, buoyant Asia


Mumbai: The rupee climbed on Wednesday, 19 December, as gains in Asian stock markets raised dealers’ hopes of capital inflows into local shares, though the prospect of central bank intervention weighed.

At 9:45am, the partially convertible rupee was at 39.48/49 a dollar, strengthening from the previous close of 39.54/55. It hit a near-decade high of 39.16 last month.

“There is a large flow that the market seems to be positioning itself for," said a senior dealer with a foreign bank. “But if that does not materialise soon, we could see some short covering."

Foreign funds have bought more than $800 million worth of shares so far this month after selling more than $1.1 billion last month. Capital inflows are a key driver of the stock market’s rise and the rupee’s rally this year.

Sentiment on the rupee was boosted after Asian shares recovered from a five-day losing streak on Wednesday, as solid U.S. earnings reports reassured investors that companies could weather the credit storm in global financial markets.

Still, with the year-end holiday season approaching, dealers anticipated oil companies would start buying dollars earlier than usual to meet monthly payments, which would put further pressure on the rupee.

The risk of intervention by the central bank, which could nudge the rupee weaker towards year-end, also weighed on sentiment, dealers said.

The Reserve Bank of India (RBI) bought $64.5 billion in intervention in the first 10 months of the year and is widely seen as having played an active role in the rupee market in November and December too.