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Monday September 7, 06:20 PM
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Rupee rises for 4th day as stocks rally
By Swati Bhat
MUMBAI (Reuters) - The rupee gained for a fourth straight session on Monday, with a rally in domestic shares fueling hopes for foreign portfolio inflows but dollar demand from oil refiners kept a lid on the rise.
The partially convertible rupee closed at 48.66/67 per dollar, half a percent stronger than Friday's close of 48.90/91. Last week, the rupee had dropped to as low as 49.21, its weakest since July 13.
"There was lot of short-covering in equities globally, and now that we have closed above 16,000 points on the Sensex (^BSESN : 16632.01 -222.92
), I think the bullish sentiment will continue," said Madhusudan Somani, head of foreign exchange trading at Yes Bank (YESBANK.NS : 248.85 -1).
He was referring to the BSE share index, which climbed 2.1 percent to its highest close in 15 months, helped by positive company announcements, firmer global markets and signs investor appetite for IPOs remain robust despite muted recent stock market debuts.
"Globally equities are looking set for a breakout. On the INR we're still underperformed," Somani said.
India's foreign exchange reserves rose by more than $4 billion in the week to Aug. 28.
Somani said state-run banks bought dollars through the day. Oil is India's biggest import and refiners are the largest buyers of dollars in the domestic currency market.
Foreign funds have bought a net $8.1 billion of local shares in 2009, after selling more than $13 billion last year.
"With the dollar weakening against the G7 currencies, I guess the USD/INR will continue to trade with an offered bias. The rupee is very much likely to go towards 48.5 in the near term," Somani said. The dollar and the yen weakened on Monday, with the euro advancing while the Australian dollar hit its strongest level in a year as shares gained after a G20 pledge to keep economic stimulus packages in place.
The dollar index, a gauge of the U.S. unit's performance against six majors, was down 0.3 percent.
One-month offshore non-deliverable forward contracts for the rupee were at 48.67/77, almost unchanged from the onshore spot closing rate.
In the currency futures market , the most traded near-month contracts on the National Stock Exchange (^NSEI : 4941.75 -63.8) and MCX-SX closed at 48.7225 and 48.72 respectively, with the total traded volume on the two exchanges at a lower-than-average $1.4 billion.
(For more news on Reuters Money click http://www.reutersmoney.in)
