Rupee retraces from 3-week low on dollar inflows

Rupee retraces from 3-week low on dollar inflows

Mumbai: The rupee recovered most of its lost ground on Monday after falling to near three-week lows earlier in the day, on some likely dollar inflows from a large corporate and as local stocks turned positive.

“There was good amount of dollar inflows today that helped the rupee to recover to some extent. But market is illiquid as most foreign banks are away," said Ashtosh Raina, head of FX trading at HDFC Bank.

Dealers said around $500 million to $600 million of inflows were seen during the day by a Mumbai-based power distributor owned by a large conglomerate.

The partially convertible rupee ended at 45.47/48 per dollar after falling to 45.66 per dollar, its lowest since 1 December. It had ended at 45.34/35 per dollar on Thursday. The market was shut on Friday for a local holiday.

Dealers expect the Indian unit to move in a 45.20-45.65 band this week.

Foreign funds had dumped a net $581.44 million worth of shares so far this month until Thursday as, typically, foreign investors are in a profit booking mode.

Total net foreign fund inflows so far in 2010 stand at $28.4 billion, on top of the $17.5 billion invested last year.

Foreign institutional investors (FIIs) showed higher-than-expected interest in subscribing to state-run Punjab and Sind Bank’s recently closed initial public offer.

“According to my calculation, FIIs brought in around $950 million towards Punjab and Sind IPO as there was a huge over subscription, much more than expected," said a foreign bank dealer.

Punjab & Sind Bank’s initial share offer was subscribed 50.75 times, data from the stock exchanges showed. Shares ended up 0.1% on Monday, after rising as much as 0.7% in the day, as software majors soared to a record high on optimistic outlook for the sector, but upside was limited due to low activity as the year-end neared.

“The rupee’s technical resistance is 45.60. However, even if it breaks that level, it should not fall below 46," HDFC Bank’s Raina said.

The euro hit an all-time low against the Swiss franc and struggled versus the dollar on Monday as investors looked for more aggressive solutions from European leaders to the euro zone’s debt problems.

The index of the dollar against six major currencies was up 0.05% at 80.415 points at close of local markets.

One-month offshore non-deliverable forward contracts ended at 45.78, weaker compared to 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 closed at 45.55, 45.5625 and 45.5425 respectively with the total traded volume on the three exchanges at about $5.4 billion.