Rupee drops on dollar short-covering, oil demand
MUMBAI (Reuters) - The rupee was weighed down by strong dollar demand from oil firms on Thursday but the RBI's notification of the increase in foreign institutional investment limits in debt prompted some dollar selling by exporters.
The RBI relaxed some of the rules for foreign institutional investors (FIIs) buying into domestic debt as part of the government's long-expected $10 billion increase in corporate and government debt limits.
The increase in FII limits will bring in more dollar inflows and help the rupee, prompting some exporters to liquidate their dollar holdings at current levels, traders said.
The rupee is expected to trade in a range until the Reserve Bank of India's critical policy review on Tuesday, when the central bank is widely expected to cut interest rates by 25 basis points. Forex markets will be closed on Friday for a local holiday.
"There weren't too many flows today but oil demand was seen all day. News about the hike in FII limits in bonds helped the rupee, though actual flow still needs to come. These are only sentiment boosters," said Hari Chandramgethen, head of foreign exchange trading at South Indian Bank.
"The rupee is likely to be in a range of 53.55-54.30 next week as some nervousness before policy can be expected," he added.
The partially convertible rupee closed at 53.68/69 per dollar versus its previous close of 53.665/675. The unit moved in a wide range of 53.62 to 53.8950.
Traders said there was strong dollar demand from oil refiners, whose demand typically tends to peak at month-ends, when they are required to make import payments.
Some traders were also seen covering their short dollar positions ahead of the long weekend.
The Sensex fell as Tata Motors Ltd (TAMO.NS) slumped after the company issued a profit warning at its key Jaguar Land Rover unit.
In the onshore forwards market, the one-year premium rose to 335 points from 329.75 points on Wednesday while in the offshore non-deliverable forwards, the one-month contract was at 53.90 while the three-month was at 54.47.
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 53.6950 with a total traded volume of $6.50 billion.
(Editing by Jijo Jacob)
- Tweet this
- Share this
- Digg this
- One dead, one wounded in shooting in Chicago financial district
- Israel, Palestinians locked in vicious circle of Gaza wars
- U.S. says hopeful of WTO deal with India only hours before deadline
- UPDATE 2-Bombardier plans more job cuts, Russia plans intact
- Netanyahu vows to complete Gaza tunnels destruction
The United States said on Thursday it was hopeful that differences between India and much of the rest of the world over a major trade agreement could be resolved in time, with only hours remaining before the deal has to be signed. Full Article
ONGC, Oil India bid $1.5 bln for stake in Murphy Oil's Malaysia assets - sources Full Article