India rupee snaps 5-day losing streak; banks sell dollars

Tue Nov 27, 2012 5:48pm IST

Related Topics

* Rupee ends at 55.45/46 per dollar vs prev close of 55.73/74

* Custodian banks sell dollar with stocks hitting 2-1/2 wk highs

* Large dollar buying by oil firms prevents further gains

By Swati Bhat

MUMBAI, Nov 27 (Reuters) - The Indian rupee snapped a five-day losing streak on Tuesday as custodian banks sold dollars on the back of sharp gains in the domestic share market, but persistent dollar demand from oil refiners to meet month-end requirements capped the gains.

Traders are also hopeful the government would succeed in pushing through key reforms in the winter session, despite the parliament having been adjourned for a fourth day.

Moody's also reiterated that its outlook on India's sovereign rating of Baa3 remains stable, citing the country's high savings and investment rates.

"The way the rupee had been moving for the past few days it appeared that we might have hit 56 today itself, but it received some respite from gains in stocks and the euro," said Paresh Nayar, head of fixed income and forex trading at First Rand Bank.

"There seem to have been good custodian flows today. Demand from oilers was persistent since the last few days. Trade deficit numbers will be crucial now. Market could see a wide and choppy range of 54.30 and 56.20 in the next few days," Nayar added.

Indian shares posted their biggest daily gain in more than two months as investor sentiment turned positive on growing hopes the government would push through reforms to stimulate growth and avoid a ratings downgrade.

The partially convertible rupee closed at 55.45/46 per dollar up 0.5 percent versus its previous close of 55.73/74 on Monday.

Foreign fund flows into and out of the share market have a huge influence on the rupee's fortunes. Foreign funds have bought shares worth more than $19 billion so far in 2012 but the rupee remains down about 4.3 percent.

Traders said oil refiners, the biggest buyers of dollars in the domestic currency market have been buying continuously over the last few days to meet their month-end import commitments, hurting the rupee.

Lack of dollar inflows had also exaggerated the fall due to oil demand, traders said. The central bank is expected to step in and sell dollars to prevent the rupee from slipping below 56, traders said.

Euro's gains versus the dollar also aided the rupee. The euro bounced to a one-month high against the dollar on Tuesday after international lenders agreed a new debt target for Greece, but eased back after a Fed policymaker's comments boosted the U.S. currency.

In the offshore non-deliverable forwards market, the one-month contract was at 55.72 while the three-month was at 56.30.

In the currency futures market, the most-traded near-term dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 55.7250 with a total traded volume at around $5.97 billion. (Editing by Anand Basu)

FILED UNDER:

REUTERS EXCLUSIVE

Reuters Showcase

Documents' Leak

Documents' Leak

India widens oil leaks probe to defence ministry  Full Article 

Jim O’Neill Interview

Jim O’Neill Interview

'India can become world’s fifth-largest economy by decade’s end'  Full Article 

Food Security

Food Security

India will not cut multi-billion dollar food handout programme - PM  Full Article 

Ola's Expansion Drive

Ola's Expansion Drive

Taxi group Ola steps up expansion drive  Full Article 

Sahara Saga

Sahara Saga

Sahara's Grosvenor House hotel in London put up for sale   Full Article 

Suzlon Energy

Suzlon Energy

Suzlon expects to turn profitable in fiscal 2016: chairman   Full Article 

Eicher Motors Stake

Eicher Motors Stake

Volvo selling up to $300 mln worth of Eicher shares  Full Article 

Beef Trade

Beef Trade

Maharashtra clamps down on beef trade through new act  Full Article 

Budget 2015

Budget 2015

Budget announcements and reactions from the industry  Full Coverage 

Reuters India Mobile

Reuters India Mobile

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