Rupee strengthens on dollar inflows

Rupee strengthens on dollar inflows

Mumbai: The rupee bounced off the day’s lows on Friday helped by dollar inflows towards a share sale by an infrastructure firm, but weak domestic shares and the dollar’s gains overseas limited further gains.

“There were a lot of inward flows seen today, likely towards a share sale by an infrastructure company and also some other inflows as well," said Madhusudan Somani, head of foreign exchange trading at Yes Bank.

GMR Infrastructure has raised $315 million in a share sale to mostly foreign investors, three sources with direct knowledge of the deal said on Friday.

Dealers said the inflows towards the GMR issue was likely to have been around $250-$300 million.

These inflows helped the partially convertible rupee close at 44.32/33 per dollar, off its low of 44.5850 and 0.3% stronger than its Thursday’s close of 44.44/45.

On Thursday, the rupee had touched 44.18, revisiting a 19-month high reached earlier this week. The rupee closed the week down 0.1%.

Dealers said gains in the dollar versus majors and losses in the equity market prevented further gains in the rupee.

The euro fell on Friday on concerns about how Greece will service its debt, while the dollar and the yen gained as falls in equity markets led investors to cut positions in riskier currencies.

Indian shares closed the week lower, its first decline in 10 weeks, after they shed 0.3% on Friday, with Reliance Industries and outsourcers leading the decline.

Foreign fund investments into the sharemarket determine the rupee’s fortune to a large extent. Foreigners have so far in 2010 bought shares worth a net $5.4 billion, adding to net inflows of a record $17.5 billion last year.

“The rupee has held well between the 44.20-44.70 range for the last 10 sessions, and this is expected to hold next week unless very aggressive rate hikes are seen at the policy, which is very unlikely," said Vikas Chittiprolu, a senior forex dealer with state-run Andhra Bank.

India’s central bank will announce its annual monetary policy on 20 April.

A Reuters survey showed most economists expect an increase in both the repo and reverse repo rates on Tuesday. Among those expecting a rise, roughly two-thirds predicted 25 basis point increases and one-third foresaw 50 basis point hikes.

One-month offshore non-deliverable forward contracts were quoting at 44.36, a touch 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 MCX-SX closed at 44.3775 and 44.3750 respectively, with the total traded volume on the two exchanges at about $8.2 billion.