India rupee hits over one-month high on partial diesel deregulation

Thu Jan 17, 2013 5:14pm IST

Related Topics

* Rupee ends at 54.3850/3950 per dollar vs 54.69/70 on Wednesday

* Diesel move to shrink subsidy burden; reduce fiscal deficit

* INR likely to move in 53.60-54.50 range in the near term - trader

By Swati Bhat

MUMBAI, Jan 18 (Reuters) - The Indian rupee strengthened to its highest level in more than a month on Thursday as the government's move to partially deregulate diesel prices boosted hopes the widening fiscal deficit would gradually come down.

State-run Indian oil marketing companies can now raise diesel prices in line with increases in global crude oil prices, Oil Minister Veerappa Moily said, a move that could help the government reduce its vast subsidy bill.

However, Moily said the government cannot abruptly put an end to diesel subsidies.

Traders said a gradual rise in diesel prices would also reduce its inflationary impact and in the medium term bring down the fiscal deficit but oil marketing companies are yet to announce any hike in prices.

"Rupee rose mainly on the diesel news. There were some flows heard of in the morning and the euro also ran away in afternoon trade which further boosted the INR," said Hari Chandramgethen, head of foreign exchange trading at South Indian Bank.

"In the near-term, I expect the pair to hold in a 53.60 to 54.50 range. Tomorrow we may test 54.05 levels," he added.

The partially convertible rupee closed at 54.3850/3950 per dollar versus its previous close of 54.69/70.

Traders said gains in the domestic share market also aided sentiment.

Shares advanced for the third time in four days, led by gains in state-run oil companies after the government's move.

Bullish bets on the Indian rupee fell in line with most other Asian currencies, according to the latest Asia wide forex positioning survey of 14 analysts.

In the onshore forwards, the three-month premium dropped to 97 points from 98.75 previously while the 1-year dropped to 333.75 from 342 on the back of the rupee's gains but premiums expected to stay high in the near-term.

"RBI's dollar funding window will keep 1-3M FX premium at elevated levels to lead forward supplies and lag forward demand for dollars," said J.Moses Harding, head of asset liability management at IndusInd Bank.

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 54.40 with a total traded volume of a high $7.7 billion. (Editing by Anand Basu)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Economic Pulse

REUTERS SHOWCASE

Deregulation Impact

Deregulation Impact

Private fuel retailers to dip toe, not dive back, into India  Full Article 

Gold Import

Gold Import

RBI will not change gold import rules - sources  Full Article 

Idea Results

Idea Results

Idea Cellular Q2 profit up 69 percent  Full Article 

An RBI First

An RBI First

RBI releases minutes of financial stability council's Aug meet  Full Article 

Global Shares

Global Shares

Japanese stocks lead shares worldwide, IBM weighs on Dow  Full Article 

IBM Chip Unit

IBM Chip Unit

IBM to pay Globalfoundries to take chip unit  Full Article 

IBM Earnings

IBM Earnings

IBM ditches 2015 operating EPS target, shares slump 7 pct  Full Article 

Reuters India Mobile

Reuters India Mobile

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