Rupee gains on custodian banks; sentiment weak

MUMBAI Mon Nov 19, 2012 5:18pm IST

A grocery shop owner counts rupees notes in Ahmedabad May 23, 2012. REUTERS/Amit Dave/Files

A grocery shop owner counts rupees notes in Ahmedabad May 23, 2012.

Credit: Reuters/Amit Dave/Files

Related Topics

MUMBAI (Reuters) - The rupee rebounded on Monday from over two-month lows in the previous session on the back of dollar sales by custodian banks and a broad risk-on mood globally, but dollar demand from oil firms capped the gains.

Global shares and regional currencies gained on Monday on what investors perceived as encouraging signs of progress in talks to resolve the fiscal crunch in the United States.

However, caution is expected to prevail ahead of the start of the winter session of parliament, which will test the government's resolve to pass legislation at a time when worries about the fiscal deficit are rising.

Last week, India raised less than targeted in its auction of 2G mobile spectrum, exacerbating doubts about whether the government can meet its goal to contain its fiscal deficit at 5.3 percent of gross domestic product.

"After the 2G auction it seems difficult for the government to contain the fiscal deficit at 5.3 percent as estimated by the finance minister, so bias will be towards weakening of the rupee," said Uday Bhatt, a forex dealer with UCO Bank.

"The broad range for the near-term should be 54.50 to 56.00," he added.

The partially convertible rupee closed at 55.06/07 per dollar versus its previous close of 55.1650/1750. On Friday, the unit had dropped to a low of 55.2050, its weakest since September 13.

Traders saw good dollar inflows from custodian banks, helping the rupee gain to as much as 54.9375, although demand from oil refiners capped broader gains in the domestic currency.

Traders said the movement of the local share markets will also be key, given the importance of foreign fund flows to Indian markets. The benchmark BSE Sensex edged higher on Monday, rebounding from two-month lows.

In the offshore non-deliverable forwards market, the most-active one-month contract was at 55.32 while the three-month was at 55.90.

In the currency futures market, the most-traded near-month dollar/rupee contract on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 55.11 with a total traded volume of $4.35 billion.

(Editing by Rafael Nam)

FILED UNDER:

Reuters Showcase

Land Ordinance

Land Ordinance

Modi says willing to make changes in land decree  Full Article 

Sahara Salaries

Sahara Salaries

Some staff say Sahara has not paid salaries for months   Full Article 

DLF Fined

DLF Fined

DLF says reviewing $8.4 million SEBI penalty  Full Article 

Gold Demand

Gold Demand

India gold demand muted, eyes cut in import duty  Full Article 

Rail Budget

Rail Budget

Breakingviews - India goes back to future with $137 bln rail push  Full Article | Full Coverage 

Clean Energy

Clean Energy

India says clean energy a $160 billion opportunity over five years  Full Article 

Fall From Grace

Fall From Grace

How Sands fell from grace at Standard Chartered   Full Article | Related Story 

Buffett Annual Letter

Buffett Annual Letter

Buffett, a cheerleader for America, takes his checkbook abroad  Full Article 

Reuters India Mobile

Reuters India Mobile

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