MUMBAI: The Indian rupee bounced back on Tuesday from a three-week low touched in the previous session, supported by strong Asian currencies and positive local shares, but dollar demand from local oil firms capped further rise.
The mood in the local forex market was cautious, traders said, owing to the euro's uncertain outlook and on worries over Greece's sovereign debt crisis.
The partially convertible rupee ended at 44.84/85 per dollar, 0.4 percent stronger than its 45.00/01 previous close, after moving in a 44.8450-44.9650 range in the day.
"Fundamentally, there is no reason for the euro to strengthen because even if the Greece crisis is solved, there are a host of other issues waiting in the wings," said N.S. Venkatesh, treasurer at IDBI Bank."So any strength in the euro is most likely to be a reflection of some weakness in the dollar and not due to inherent positive factors in the euro."
The euro rose on Tuesday as investors bet Greek Prime Minister George Papandreou would survive a confidence vote crucial in helping the country avert a debt default.
The euro was $1.4357 at the close of local currency market trade versus $1.4217 on Monday.
The index of the dollar against six major currencies was down 0.27 percent at 74.823 points against 75.379.
The benchmark share index closed up only 0.31 percent at 17,560.30 points after rising more than 1 percent during trade as investors were unconvinced the market could sustain the rise given stubbornly high inflation, rising interest rates and slowing growth, traders said.
Foreign funds have sold nearly $213 million of local shares so far in June, after offloading $1.16 billion in May.
Oil rose on Tuesday from a dive to a four-month low in the previous session as the euro gained against the dollar ahead of a confidence vote in Greece aimed at avoiding a messy default of its sovereign debt.
India imports more than three-quarters of its crude oil requirements and domestic oil firms are the biggest dollar purchasers in the local forex market.
The one-month onshore forward premium was at 25 points versus 23 at last close. The three-month was at 72.25 points from 70.25 and the one-year was at 241.75 points from 230.75.
One-month offshore non-deliverable forward contracts were quoted at 45.03, 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 44.9025, 44.9075, 44.9050 respectively. The total volume was at $7.78 billion.
Copyright Reuters, 2011
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