BackRupee rises to two-week high on share gains, weak dollar
Rupee rises to two-week high on share gains, weak dollar
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Mumbai: The rupee rose more than 1% on Monday, its biggest one-day gain in a two months, as the dollar tumbled versus major units overseas and a sharp rise in local shares raised expectations for more capital inflows.
The partially convertible rupee closed at 48.21/22 per dollar, 1.1% stronger than Friday’s close of 48.73/74. The unit rose to as high as 48.18, its highest since July 6.
It was the rupee’s biggest gain since the post-election rally on May 18, when it had surged 3.2%, its best performance in 11 years.
“The dollar’s weakness globally and the increase in risk appetite fuelling gains in global equities have helped the rupee gain. As long as equities are strong, the uptrend in the rupee is likely to continue," said Agam Gupta, head of foreign exchange trading at Standard Chartered Bank.
The dollar fell broadly on Monday, hitting a six-week low against the euro as traders bought riskier assets as speculation of solid corporate earnings boosted share prices. The index of the dollar versus six majors, was down 0.6%.
Indian shares rose 3% to their highest close in 5 weeks.
Foreigners have bought a net $1.2 billion worth of local stocks so far in July, taking net purchases in 2009 to $6.2 billion, and further buying was expected in a rising market.
Dealers said dollar demand from oil companies capped the rupee’s rise. Oil is India’s largest import and refiners are the biggest buyers of dollars in the domestic market.
One-month offshore non-deliverable forward contracts, traded in Singapore were quoted at 48.19/29, marginally stronger than the onshore spot rate, indicating a bullish near-term outlook.
Dealers said lower non-deliverable forward rates were key in prompting banks to cut their long dollar positions.
In the currency futures market, the most traded near-month contract on the National Stock Exchange and MCX-SX closed at 48.2275 and 48.23 respectively, with the total traded volume on the two exchanges at about $1.8 billion.
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