MUMBAI: The Indian rupee strengthened on Wednesday, pulling further away from a two-year low touched in the previous session, aided by dollar inflows and a firm euro.
The partially convertible rupee was at 47.86/87 per dollar, stronger than its close of 48.05/06 on Tuesday, when it had hit 48.24, a level last seen on Sept. 25, 2009.
Traders said trimming of some long dollar positions before the end of a two-day US Federal Reserve meeting also helped the rupee.
The Fed is expected to announce at 1815 GMT a fresh effort to invigorate the faltering US recovery by pushing long-term borrowing costs lower through rebalancing of its $2.8 trillion portfolio of bond holdings towards longer-term securities.
"Nobody would want to hold excessive long positions on the dollar when the Fed is so likely to announce more monetary easing," said a senior forex dealer with a state-owned bank.
"There is also positive momentum for the rupee due to inflows."
On Tuesday, an inflow of around $600 million, mostly on account of a stake sale by Reliance Capital in its insurance arm to Japan's Nippon Life Insurance had helped the rupee recover from the two-year low.
The euro rallied against the greenback as markets focussed on the possibility of further stimulus from the Fed and aided by Greece's pledge to bring forward painful austerity measures.
The euro was at $1.3697, higher from $1.3682 at the end of the rupee trade on Tuesday, while the index of the dollar against six major currencies was 77.026 points from 77.105.
A sharp rise in the rupee is, however, unlikely, as the country's persistent current account deficit keeps the currency vulnerable and as domestic oil refiners could step up dollar purchases for month-end payments, traders said.
Oil is India's biggest import item and domestic oil firms are the biggest buyers of dollar in the local currency market.
The one-month onshore forward premium was at 16.50 points from 17.25 points on Tuesday, the three-month was at 49.50 points from 49.25 and the one-year was at 116.75 points from 114.75.
The one-month offshore non-deliverable forward contracts were quoted at 48.14, 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 all at 47.9150. The total volume was $2.07 billion.
Copyright Reuters, 2011
Comments
Comments are closed for this article.