Rupee ends off lows on euro surge; volatility seen

Rupee ends off lows on euro surge; volatility seen

Mumbai: The rupee clawed back from the day’s low on Monday in choppy trade, after a rebound in the euro on speculation of more support from the European Central Bank, while weak domestic equities prevented a bigger recovery.

The partially convertible rupee ended at 49.445/455 per dollar only marginally weaker than 49.42/43 on Friday when it had touched 49.90 -- a level not seen since mid-May 2009.

“The main cause of worry is Europe’s debt crisis. Markets now hope to see concrete action from policymakers to back comforting statements," said Pramod Patil, senior foreign exchange dealer at State Bank of Mauritius.

“Until then, the rupee will continue to see volatility."

The unit moved in a wide band of 49.80 to 49.3250 during trade.

The euro recovered early losses against the dollar on media reports that the European Central Bank may consider more measures to support the economy, traders said.

The euro was at $1.3523 at end of rupee trade versus $1.3453 on Friday, while the index of the dollar against six major currencies was at 78.029 points from 78.502 points previously.

Standard Chartered Bank lowered its short-term rating on rupee to “neutral" from “overweight," citing a deterioration in global sentiment, and predicted the rupee will touch 51 per dollar by end-December.

Rating agency Crisil said it expects developed economies to witness a slowdown, but will avoid another recession.

“In our opinion, this will lead to a pickup in FII (foreign institutional investors) inflows towards early 2012 as the risk appetite for investment in emerging markets returns," it said in a research note, adding it expects the local currency to rebound to 45 per dollar by the end of March 2012.

Foreign funds have sold $7 million of local shares so far in September after having sold more than $2.2 billion in the previous month.

Main share index ended 0.7% lower marking a fourth straight session of fall.

The one-month onshore forward premium was at 21.25 points from 20.50 on Friday, the three-month was at 64.50 points from 64.75 and the one-year was at 127 points from 131.25.

The one-month offshore non-deliverable forward contracts were quoted at 49.73, weaker than the onshore spot rate, suggesting a bearish near-term outlook.

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 ended at 49.4375, 49.4700 and 49.4800 respectively. The total traded volume on the three exchanges was $10.32 billion.