MUMBAI: The rupee strengthened on Wednesday, in line with other regional currencies, but could not sustain its early highs as concerns of another decline in risk appetite in global equities pushed local stocks down.
At 10:45 a.m. (0515 GMT), the partially convertible rupee was at 46.57/58 per dollar, off an early high of 46.5050 but still stronger than its close of 46.66/67 on Tuesday.
"The rupee gained at open tracking the dollar's fall, but then stocks turned negative which has pressured the unit a bit. Stocks will now wait for the European markets to open, trading would be rangebound till then," said Sudarshana Bhat, head of foreign exchange trading, at state-run Corporation Bank.
"46.62 is likely to be the topside for the dollar, but rupee may edge up later in the day. Relaxation of the external commercial borrowing norms is also positive for the rupee. It should hold in a 46.45-60 range today," he added.
India's central bank said on Tuesday banks may allow changes in the repayment of foreign currency borrowings if the average maturity of such debt is maintained.
It also said changes in the currency of borrowing may be allowed as long as the currency is freely convertible.
Indian shares were down 0.1 per cent after having risen 0.6 per cent earlier. Shares are closely watched for cues on the direction of foreign fund flows, which are key in determining direction for the rupee.
Most Asian units were stronger compared to the dollar.
The euro fell on Wednesday, with investors awaiting details of a rescue package for Greece, keen to see how it could impact the euro zone economy.
One-month offshore non-deliverable forward contracts was quoting at 46.61/71, weaker than the onshore spot rate.
"Rupee is likely to hold in a 46.20-90 range until the budget. European problems, US recovery, upcoming initial public offerings and government's disinvestment plans will all be crucial going ahead. But rupee is mostly seen edging up in the long run," Bhat said.
The budget is due to be presented on February 26. In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were both quoting at 46.6125, with the total traded volume on the two exchanges at about $1.1 billion.
