Indian rupee recovers from 1-1/2 mth low on corporate dlr sales

Tue Nov 6, 2012 5:12pm IST

Related Topics

* Rupee ends at 54.43/44 dlr vs 54.60/61 on Mon

* Dollar sales by pharma, IT firms seen

* RBI Gov Subbarao says rate cut in Dec unlikely

By Swati Bhat

MUMBAI, Nov 6 (Reuters) - The Indian rupee retreated from one-and-half month lows hit early in the session to close stronger on Tuesday boosted by corporate dollar sales and a mild recovery in the domestic stock markets.

The outlook for the rupee remains uncertain, as the currency continues to reel from the disappointment after the Reserve Bank of India kept interest rates on hold on Oct. 30, signalling any monetary easing would not come until the January-March quarter.

That stance was confirmed by central bank governor Duvvuri Subbarao in an interview with Reuters on Monday, saying a rate cut at its next policy review in December was "highly improbable."

"Yesterday the break of 54.20 triggered stop-losses. Today morning the market felt USD/INR may move towards 55.00, but the rupee is getting tougher to predict," said Paresh Nayar, head of fixed income and forex trading at First Rand Bank.

"The impact of the U.S. elections may be felt on the euro and that would influence the rupee as well. But feel there will be good offers to sell between 54.50-54.80 levels," he added.

The partially convertible rupee closed at 54.43/44 per dollar as per the SBI closing rate, versus its previous close of 54.60/61.

Some drug makers and technology firms were spotted selling dollars in the second half of the session, helping the rupee recover from a more than one-and-half month low of 54.7850 touched earlier in the session, traders said.

Dollar sales from custodian banks were also seen, according to dealers. Foreign investors have bought more than $18 billion worth of shares so far in 2012.

India's main indexes rose for a fifth consecutive session on Tuesday, as drug maker Cipla jumped after posting a surge in quarterly earnings, while State Bank of India rose on hopes for rising demand for loans in the holiday season.

Traders will closely monitor the U.S. election outcome for direction, while a parliamentary vote in Greece on budget and labour reforms on Wednesday will also be key.

Still, longer-term, the prospect of the rupee will likely be determined by the domestic fiscal and economic outlook.

Investors are watching how much in additional borrowing the government will announce for the fiscal year as it seeks to contain the fiscal deficit at 5.3 percent, wider than its initial target of 5.1 percent.

India's widening current account and fiscal deficits, and worries about growth, had been key factors that had sent the rupee to a record low in late June.

In the offshore non-deliverable forwards market, the one-month contract was at 54.77 while the three-month was at 55.35.

In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at 54.71 with a total traded volume of around $4.9 billion. (Editing by Rafael Nam)

FILED UNDER:

Diplomacy

Reuters Showcase

Microfinance

Microfinance

Funding the unfunded: India helps small business borrow to grow  Full Article 

Insurance Sector

Insurance Sector

UK healthcare firm Bupa sees strong growth in India  Full Article 

Market Eye

Market Eye

FTSE adds nine Indian firms as large-caps in Asia-Pacific ex-Japan index   Full Article 

China Economy

China Economy

China signals "new normal" with lower annual growth target  Full Article 

E-commerce

E-commerce

China backs e-commerce expansion in win for Alibaba, JD.com  Full Article 

Monsoon Season

Monsoon Season

Exclusive - India expects better monsoon rains this year  Full Article 

'India's Daughter'

'India's Daughter'

Documentary on 2012 Delhi gang rape banned in India  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage