Rupee weakens on dollar demand

Rupee weakens on dollar demand

Mumbai: The rupee ended weaker on Monday as month-end dollar demand from oil importers dragged the local unit from early highs propelled by domestic share gains.

The partially convertible rupee ended at 45.405/415 per dollar, off an early high of 45.2050, and weaker than its 45.29/30 close on Friday.

“There was some dollar demand from importers and also a lack of inflows," said Rohan Naik, head of forex trading at Standard Chartered Bank, adding the rupee could be at 45.50 by December.

Oil is India’s biggest import and refiners are the largest buyers of dollars in the domestic currency market. Demand for dollars tends to peak towards month end when banks are required to make payments for their purchases.

Foreign funds have bought shares worth around a record $28.7 billion so far in 2010, compared with last year’s $17.5 billion.

Indian shares more than reversed their previous session’s losses to close 1.9% higher on Monday, supported by world equities on the back of Ireland’s rescue deal, but investors eyed further developments on the local corruption scandals.

The euro rose on Monday after Ireland sought an international bailout to tackle its debt crisis, but analysts said budgetary worries in other euro zone countries would keep investors wary about the single currency.

The euro climbed to a one-week high of $1.3786 piercing the 38.2% retracement of its 4-18 November fall at $1.3765, but gains proved difficult to sustain.