MUMBAI: The Indian rupee fell on Thursday, weighed by oil importers' demand for dollars and weak domestic shares, with movements in the euro eyed in the backdrop of debt worries in the region.
The euro edged up from lows against major currencies in Asia but was seen vulnerable to renewed selling pressure as worries about the euro zone sovereign debt crisis spread to the region's banking sector.
The partially convertible rupee was 45.3600/3650, weaker than 45.2450 per dollar on Wednesday.
Dealers said they expected the rupee to trade in a 45.30-45.50 per dollar range intra-day.
"Shares are weak and there is also demand from oil companies," said a senior trader at a private bank.
Indian shares fell half a percent early on Thursday, giving up the previous session's gains and tracking a fall in Asian peers.
India is estimated to owe Iran around $4 billion for its oil imports and domestic oil firms have been aggressively buying dollar to make these payments.
Forwards fell as dollar shortage in the cash market prompted investors to do a "buy-sell swap" where traders bought spot dollars and sold forward dollars. They, however, did not expect the dollar shortage to continue for long.
"Strain on dollar liquidity will see bids in spot rupee," said Vikas Chittiprolu, a senior forex dealer with Andhra Bank.
The one-month onshore forward premium was at 6.00 points after falling to negative 2.75 points early -- its lowest in 34 months. After closing at 2.75 points on Wednesday.
The three-month was at 24.50 points, after dropping to 7.50 percent. It had ended at 23 points on Wednesday.
The one-year onshore forward premium was at 124.75 points, after falling to 83.75 points, from 123 points at close on Wednesday.
One-month offshore non-deliverable forward contracts were quoted at 45.41, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange at 45.35, the MCX-SX at 45.3475 and the United Stock Exchange at 45.3500. The total volume was at $4.5 billion.
Copyright Reuters, 2011
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