Rupee hits over one-month high on partial diesel deregulation

MUMBAI Thu Jan 17, 2013 6:22pm IST

A cashier checks rupee notes inside a bank in Agartala July 24, 2009. REUTERS/Jayanta Dey/Files

A cashier checks rupee notes inside a bank in Agartala July 24, 2009.

Credit: Reuters/Jayanta Dey/Files

Related Topics

MUMBAI (Reuters) - The 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 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. .BO

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

India-China Ties

REUTERS SHOWCASE

India-US Diplomacy

India-US Diplomacy

Obama to nominate Indian-American Richard Verma as India ambassador - congressional source.  Full Article 

GMR in Nepal

GMR in Nepal

Nepal clears India’s GMR plan for $1.4 bln hydroelectric plant.  Full Article 

LIC on Markets

LIC on Markets

LIC chairman bullish on Indian markets  Full Article 

India Rains

India Rains

Monsoon rains weaken as late retreat looms.  Full Article 

Infosys-Huawei

Infosys-Huawei

Infosys partners with China's Huawei for cloud-based services  Full Article 

Gold Outlook

Gold Outlook

Gold imports seen up, premiums likely to double on festive buying  Full Article 

Trade Dispute

Trade Dispute

U.S. to press India on trade row during Modi's Washington visit  Full Article 

Reuters India Mobile

Reuters India Mobile

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