Rupee drops on oil payments, easier euro

Rupee drops on oil payments, easier euro

Mumbai: The rupee eased on Monday on demand for dollars from oil refiners and tracking the euro’s drop against the US unit, and traders said the market should be rangebound ahead of the central bank’s policy on Tuesday.

At 11:17am, the partially convertible rupee was at 44.3125/3175 per dollar, 0.2% weaker than its previous close of 44.21/22.

“Oil buying will continue, hence the rupee is weaker," said Rohan Naik, head of foreign exchange trading at Standard Chartered Bank in Mumbai.

Oil refiners are the biggest buyers of dollars in the local forex market.

World oil prices fell by 1% on Monday on news US forces had killed al-Qaeda leader Osama Bin Laden, after a decade of counter-terrorism efforts that deepened US military involvement in central Asia and the oil-rich Middle East.

The index of the dollar against six major currencies was up 0.40% at 73.227 points after the bin Laden report. It was at 72.898 points when the local forex market closed on Friday.

The euro was was at $1.4775, compared with $1.4866 when the rupee closed on Friday.

Naik forecast the rupee to trade in a range of 44.20-44.40.

The Reserve Bank of India is widely expected to increase key rates by 25 basis points on Tuesday, but some market participants expect a 50 basis point rise.

A Reuters poll last week showed analysts expect a total of 75 basis points rate increase by the central bank in the remainder of 2011, or 25 bps more than they expected in mid-March.

A dealer at a private bank said some traders had also covered their short positions in the dollar after the rupee had appreciated to 44.21 on Friday.

The one-month onshore forward premium was at 28.25 basis points (bps) versus 26.50 bps at previous close. The three-month was at 81.75 bps from 82 and the one-year was at 317.50 bps compared with 317.75 bps.

The one-month offshore non-deliverable forward contracts were quoted at 44.56, weaker than the onshore spot rate.

In the currency futures market , the most traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange were at 44.57, 44.5425 and 44.5375 respectively, with total volume at $2.08 billion.