ENM: Rupee at near 3-week high on share rise, weak dollar
MUMBAI: The Indian rupee strengthened to its highest level in nearly three weeks on Thursday, as gains in local shares raised hopes for sustained capital inflows, while a broadly weak dollar also cheered sentiment.
At 11:15 a.m. (0545 GMT), the partially convertible rupee was at 44.92/93 per dollar after hitting 44.8750, its strongest since Dec. 7, and 0.3 percent above its close of 45.04/05 on Wednesday.
"Rupee has risen in line with expectations. There seems to be some inflows with foreign banks, but some buying coming around these levels from oil. I expect 44.90 or max 44.85 to hold for today," said a senior forex dealer with a large state-run bank.
"The big support is at 44.80, which should not be broken I hope, so I feel the range should be 44.85-45.00," he added.
India imports nearly two-thirds of its oil needs and refiners are the largest buyers of dollars in the domestic currency market, with their demand tending to peak at the end of each month when they are required to make payments.
Dealers said broad weakness in the dollar and firm domestic shares were underpinning rupee sentiment.
The dollar weakened broadly on Thursday, hitting a seven-week low against the yen and a 28-year low against the Australian currency as traders took falls in U.S. bond yields as a cue to sell it.
The index of the dollar against six major currencies was down 0.14 percent at 79.684 points. Almost all Asian currencies too were stronger compared with the dollar.
Indian shares were trading up 0.4 percent with Reliance Industries and Larsen & Toubro leading the gains.
Foreign institutional investors (FIIs) have pulled out a net of around $466 million from Indian equities this month through Tuesday. They are, however, net investors of $28.5 billion in 2010, on top of the $17.5 billion pumped in last year.
"As of now for Q1 2011, we expect rupee to strengthen on the back of the positive fundamental framework which is likely to be supported by the return of FII inflows after a subdued session this month," economists at Yes Bank wrote in a note.
"As a result, we continue to expect USD/INR to appreciate on a trend basis and reach 43.50 levels by March, 2011,"
One-month offshore non-deliverable forward contracts were quoted at 45.13, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were at 45.12, with the total traded volume on the two exchanges at $990 million.
