Rupee ends off 2-year low on euro, local shares

Rupee ends off 2-year low on euro, local shares

Mumbai: The rupee ended off a two-year low on Tuesday, tracking gains in the euro and domestic equities, with the market taking some comfort in Greece paying two bond coupons amounting to €769 million ($1.05 billion).

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Traders said dollar inflows of around $600 million, mostly on account of a stake sale by Reliance Capital in its insurance arm to Japan’s Nippon Life Insurance , also lifted the rupee, making it unnecessary for the Indian central bank to step in.

There had been talk in the market that the central bank may intervene after the rupee dived nearly 1% in early trade.

Reliance Capital last week said it had received regulatory approval to sell a 26% stake in its insurance business to Nippon Life in a deal that values Reliance Life Insurance at $2.6 billion.

The partially convertible rupee ended at 48.05/06 to a dollar, weaker than Monday’s close of 47.815/825. Earlier in the day it touched 48.24, a level last seen on Sept. 25, 2009, after rating agency S&P downgraded Italy.

So far this year, the rupee has lost over 7% of its value against the greenback, the most among its major Asian peers.

“Greece coupon news was very comforting for a market that has been fearing a default. We now have to see how markets in the United States react to this news. But going ahead, we can at least expect some better days," said Ashtosh Raina, head of foreign exchange trade at HDFC Bank.

The euro was at $1.3682 at end of rupee trade, higher from the day’s low of $1.3594 and from $1.3669 on Monday, while the dollar index was at 77.105 points from 77.082 points previously.

Traders said the intraday recovery in rupee may have also been aided by dollar sales by some software exporting companies and cutting of dollar-long positions after stop losses were triggered.

The local benchmark share index gained more than 2%.

For rest of the week, the rupee is expected to move in 47.50-47.90 range, with any sharp upside unlikely due to pressure from the persistent current account deficit of the country, traders said.

View that Europe’s debt crisis is far from over, underlined by Standard & Poor’s unexpected downgrade of Italy’s rating may also keep a cap on the rupee, they said.

Outcome of the U.S. Federal Reserve’s meeting on Wednesday is awaited for cues on global growth, the dollar and in-turn the rupee.

The one-month onshore forward premium was at 17.25 points from 13.75 on Monday, the three-month was at 49.25 points from 43 and the one-year was at 114.75 points from 104.25.

The one-month offshore non-deliverable forward contracts were quoted at 48.25, weaker than the onshore spot rate.

In the currency futures market , the most traded near-month dollar-rupee contracts on the National Stock Exchange and the MCX-SX both ended at 48.1050 and on the United Stock Exchange at 48.1000. The total volume was $8.06 billion.