Rupee higher on stocks, dollar; U.S. data eyed

A bank employee checks a 500 rupee note at a counter of Yes Bank's microfinance division in Mumbai October 25, 2008.

MUMBAI (Reuters) - The rupee rose on Thursday aided by the dollar losses against major currencies and other Asian units ahead of the European Central Bank's policy decision due at 1145 GMT and the U.S. non-farm payroll data due on Friday.

The partially convertible rupee closed at 46.7150/7250 per dollar, 0.2 percent stronger compared with Wednesday's close of 46.805/815.

"The rupee was just stuck in a range today. Think the markets will be rangy tomorrow as well," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.

"The non-farm payroll data will be closely watched and the comments from Trichet are also going to be very important for setting direction for tomorrow."

Dealers said the rupee should hold in a range of 46.60 to 46.90 on Friday.

The euro edged up on Thursday on healthy results at Spanish and French bond auctions but investors' appetite for risk was tempered ahead of a European Central Bank policy meeting later in the day and U.S. jobs data Friday.

The index of the dollar against six majors was down 0.2 percent and most Asian units too rose versus the dollar.

Traders will be watching to see whether ECB President Jean-Claude Trichet, who is due to hold a news conference at 1230 GMT, makes a formal decision to extend liquidity to help the banking system and whether he reiterates a cautious stance on the economic outlook after robust second-quarter figures.

Indian shares nudged higher for a second day as strong U.S. manufacturing data eased some concerns about the pace of global economic recovery, but investor confidence was brittle.

Foreign funds have bought shares worth a net $12.9 billion so far in 2010, adding to last year's record inflows of $17.5 billion. The rupee had risen 4.7 percent last year but is down 0.1 percent so far due to the inconsistency of the flows.

India's widening trade gap may eclipse forex market sentiment in the near term, but prospects of capital inflows and strong economic growth may keep the outlook for the rupee bright in the medium to long term, a strategist at Standard Chartered Bank told Reuters on Wednesday.

The trade deficit swelled in July to its biggest level in almost two years, putting further pressure on the current account and on the need for India to attract capital inflows to avoid pressure on its currency.

One-month offshore non-deliverable forward contracts were quoted at 46.93, 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 closed at 46.8675 and 46.87 respectively, with the total traded volume on the two exchanges at a low $4.4 billion.

(Editing by Surojit Gupta)

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