Rupee up against broad dollar weakness

Rupee up against broad dollar weakness

Mumbai:The rupee strengthened to its highest in more than a month on Tuesday as sentiment was buoyed by the broad dollar weakness ahead of an expected interest rate cut by the US Federal Reserve.

At 10:42am the partially convertible rupee was at Rs47.86/87 per dollar, 0.4 % higher compared to its Monday’s close of Rs48.05/06. It rose to Rs47.8003 in morning deals, its strongest since 11 November.

“The rupee rose in expectation of a Fed rate cut which is seen as positive. The dollar is also losing against other major currencies," said V. Kumar, chief dealer with State Bank of Travancore.

The US Federal Reserve is widely expected to cut its key rate by 50 basis points to 0.5 % later on Tuesday.

The dollar fell to a two-month low against the euro on Tuesday as expectations grew that the Federal Reserve will cut interest rates to near zero and may lay out emergency tools to dispel a recession.

Dealers said that they would also be closely watching the local equity market for clues on the direction of fund flows.

Indian shares seesawed in early trade after Asian shares dipped, and traders said recent foreign buying may ease off given the run-up in the market so far this month.

Foreign funds have bought a net $380 million worth of Indian shares so far in December, but are still net sellers of $13.3 billion in 2008. Last year, they were net buyers of a record $17.4 billion.

One-month offshore non-deliverable forward contracts were quoting at Rs48.07/22 per dollar weaker than the onshore spot rate, indicating a bearish near-term outlook for the rupee.