Rupee rises as global risk appetite returns

Rupee rises as global risk appetite returns

Mumbai: The rupee inched up on Friday as coordinated action from major central banks to improve dollar supply to the European banking system lifted equities and the euro, with the market awaiting the Reserve Bank of India’s policy action at noon.

The Reserve Bank of India is widely expected to raise its policy rates on Friday for one last time in its 18-month long tightening cycle.

At 11:17am, the partially convertible rupee was at 47.42/43 per dollar, stronger than 47.545/555 on Thursday. It had dipped to a near two-year low of 48.02 on Wednesday.

“We are currently in a tentative risk-on situation created by the dollar liquidity improvement measures of major central banks. This is helping stocks and rupee," said a dealer with large private-sector bank.

On Thursday, the European Central Bank said it will liaise with the US Federal Reserve, the Bank of England, Bank of Japan and Swiss National Bank to provide three-month dollar loans to banks to prevent the money market from freezing up.

The euro was at $1.3856, higher than $1.3804 at end of rupee trade on Thursday, while India’s benchmark share index rose was up nearly 1 percent.

A Reuters poll on Thursday found investors have significantly increased short positions on the rupee making it most weakly positioned among major Asian currencies.

The rupee is already the worst performer among the region’s currencies declining nearly 6% against the dollar so far in 2011.

Hopes of a rise in foreign portfolio inflows were dented after state-run explorer Oil and Natural Gas Corp on Friday deferred a follow-on share sale to raise as $2.5 billion, traders said.

The one-month onshore forward premium was at 18 points from 19.50 on Thursday, the three-month was at 52 points from 54.75 and the one-year was at 123 points from 124.

One-month offshore non-deliverable forward contracts were quoted at 47.64, 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 on the United Stock Exchange were all at 47.4850. The total volume was $1.78 billion.