Rupee retreats from 4-month high

Rupee retreats from 4-month high

Mumbai: The Indian rupee pulled back on Tuesday from the previous session’s four-and-half-month high as the stock market showed signs of fatigue after a surge.

At 10:27am, the partially convertible rupee was at Rs45.12/13 per dollar, weaker than Rs45.01/02 at close on Monday, when it had touched Rs44.99, its highest level since 13 May. Traders expect the rupee to move in 45-45.25 band.

“The rupee is seeing some consolidation after the break below 45 yesterday. But exporters are likely to come in to sell dollars around 45.20-25 levels, holding the rupee above that," a senior dealer with a private bank said.

The struggling dollar got a reprieve on Tuesday, helped by a report that the Federal Reserve was weighing a more open-ended, smaller-scale bond buying programme compared with 2009.

The index of the dollar against six majors was unchanged and would be watched. Asian currencies were trading mixed versus the dollar.

Indian shares seesawed as the market met with resistance after an 11.9% rally this month. Strong foreign fund flows into the stock market in September have been fuelling a surge in the rupee.

Foreigners have moved $4.8 billion into shares this month, taking net investment so far in 2010 to $17.7 billion. The inflows had lifted the rupee 1.3% last week, its best rally in three months.

The inflows, if sustained till the end of the year, would be a record, above last year’s $17.5 billion.

“It is party time for rupee bulls to celebrate the September rally and there is no sign of reversal despite intra-month 4.4% rally. The shift to the new month and resultant subdued dollar demand will add momentum to the rupee bull-run," said J. Moses Harding, head of global markets at IndusInd Bank.

Dollar demand in the domestic currency market tends to be higher towards the end of each month when importers including oil refiners make payments.

Harding said the rupee could ease to 45.25-45.35 on profit-taking, and possibly head towards 45.50-45.65.

One-month offshore non-deliverable forward contracts were quoted at 45.25, weaker than the onshore spot rate.

In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, MCX-SX and United Stock Exchange were all at 45.35, with the total traded volume on the three exchanges at $1.12 billion.