MUMBAI: The Indian rupee ended weaker on Thursday, but recouped from intra-day lows on losses in the dollar overseas and on hopes the central bank would nudge key rates up again, luring foreign funds into the country.
"Rupee was supported by gains in the euro and other major currencies," said Sudarshana Bhat, head of forex at state-run Corporation Bank.
The euro rose to a four-month high on broad dollar weakness, aided by demand at a Spanish bond auction and on the view that euro zone interest rates may rise as early as April.
The yen, too, hovered near a record high against a broadly weak dollar, keeping alive the risk of official intervention to stem the Japanese currency's sharp rise.
The index of the dollar against six major currencies was down 0.91 percent at 75.981 points at end of trade in local forex market, lower than a four-month low of 75.995 points hit earlier in the day. On Wednesday, it had ended at 76.508 points.
The partially convertible rupee ended at 45.18/19 per dollar against its 45.11/12 close on Wednesday. Intraday, it moved in the 45.12-45.27 range.
Corporation Bank's Bhat said the rate increase by the central bank was also a reason for the rupee's recovery, though the move was widely expected and hence factored in, traders said.
The Reserve Bank of India (RBI) raised interest rates for the eighth time since last March, in line with expectations, and warned both of inflationary pressures and emerging risks to growth.
The selling spree in the rupee seen in early trade was primarily on the back of weakness in local shares, traders said.
Indian shares declined 1.1 percent, led by financials, on concerns of more monetary tightening ahead as the central bank battles stubborn inflation.
Foreign institutional investors have sold Indian shares worth about $1.70 billion this year until March 16.
The one-month onshore forward premium was at 30.25 points, down from 32.50 on Wednesday, the three-month premium at 82.50 versus 88.00 and the one-year lower at 284.50 from 288.00.
The one-month offshore non-deliverable forward contracts were quoted at 45.50, weaker than 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 the United Stock Exchange were all at 45.2900, with the total traded volume at about $7.85 billion.
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