Rupee edges up, but oil buys could weigh

Rupee edges up, but oil buys could weigh

Mumbai: The rupee nudged higher on Wednesday on the back of firm Asian peers, but greater demand for dollars from oil importers is expected to halt the rise, traders said.

Oil is India’s biggest import item and refiners are the largest buyers of dollars in the domestic currency market.

US crude futures climbed to a 2-1/2-year peak on concern that unrest in Libya could spread to other top oil producers in the region and cut more output.

At 11:47am, the partially convertible rupee was at 45.1800/1875 per dollar, stronger than Tuesday’s close of 45.26/27.

“The rupee has strengthened because of the weak dollar. But it looks like a temporary phenomenon because the dollar might go up because of the Middle-East tension," a trader with a large private bank said.

The euro edged higher after European Central Bank officials stressed their readiness to fight inflation by raising interest rates, though it was expected to face resistance near $1.3750.

The index of the dollar against six major currencies was down 0.16% at 77.650 points.

Most Asian currencies were stronger against the dollar.

Traders said a choppy domestic sharemarket was also likely to keep sentiment cautious. Foreign funds have pulled out $1.6 billion from Indian stocks since the start of January, and has contributed to a 1.1% drop in the rupee this year.

The one-month onshore forward premiums were quoted at 23.25 points, against Tuesday’s close of 22.25.

The one-month offshore non-deliverable forward contracts were quoted at 45.44, weaker than the onshore spot rate.

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 were at 45.2250, 45.2225 and 45.2225 respectively, with the total traded volume at about $2.3 billion.