MUMBAI: The Indian rupee snapped a 3-day slide and rose on Wednesday, helped by dollar inflows and a small reprieve in the euro.
However, the undertone remained shaky due to slowing domestic growth and sluggish global economy, which could hit exports.
At 11:24 a.m. (0554 GMT), the rupee was at 49.14/15 per dollar, 0.5 percent stronger than Tuesday's close of 49.40/41. The unit is expected to move in range of 48.90 to 49.30, traders said.
"Inflows are happening, but the mood is negative," said Ananth Narayan G., head of fixed income, currencies and commodities at Standard Chartered Bank.
"The move from 44 to nearly 50 happened without too much of foreign fund outflows," he said. "This tells you that the unit is vulnerable to outflows. So, if equities slip sharply from here and outflows happen, we could see rupee moving back towards 50."
The rupee, which is partially convertible, had fallen to a 28-month-low of 49.90 on Sept. 23, losing more than 12 percent of its value from the strongest point in 2011 around late July.
The Reserve Bank of India is said to have sold dollars to halt the rupee from slipping to 50, and the prospect of intervention has helped to hold the unit up, traders said.
The main share index was trading up 0.5 percent after a three -day fall. The benchmark is one of the world's worst performers this year, having dropped about 22 percent.
European finance ministers agreed on Tuesday to safeguard their banks as doubts grew about whether a planned second bailout package for debt-laden Greece would go ahead.
The euro was at $1.3322, higher than $1.3181 at the end of rupee trade on Tuesday, while the index of the dollar against six major currencies was down 0.62 percent at 79.107 points.
The one-month onshore forward premium was steady at 21 points from Tuesday's close, the three-month was at 51 points from 52.75 and the one-year was at 97 points from 97.25.
The one-month offshore non-deliverable forward contracts were quoted at 49.34, weaker than the spot rate and indicating a bearish medium-term outlook.
In the currency futures market , the most traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and on the United Stock Exchange were all at 49.28. The total traded volume on the three exchanges was $1.34 billion.
A widening current account deficit is also clouding the outlook for the rupee.
Data released last Friday showed India's current account deficit widened to $14.1 billion in the June quarter, compared with $12 billion in the same period a year ago.
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