Indian rupee posts first monthly gain in four; hits 3-1/2 month peak

Thu Jan 31, 2013 5:49pm IST

Related Topics

* Rupee ends at 53.2150/2250 per dlr vs 53.30/31 on Wed

* Market waiting to see foreign appetite for govt stake sale

* Rupee best-performing currency in Asia so far in 2013

By Swati Bhat

MUMBAI, Jan 31 (Reuters) - The Indian rupee strengthened slightly against the dollar on Thursday after earlier hitting a three-and-a-half month high, while posting its first monthly gain in four on the back of heavy dollar inflows into the domestic equity and debt markets.

Foreign funds bought shares and bonds of more than $4 billion until the second-last day of the month, helping the rupee gain 3.3 percent, and easing concerns about India's current account deficit.

The strong inflows have come in a month in which the government announced additional fiscal and economic reforms, including allowing diesel prices to rise further and imposing duties on gold imports, shoring up confidence in the economy.

The central bank this week also delivered its first interest-rate cut in nine months, sparking more optimism about economic growth, although it was cautious on future monetary easing.

"I think there is a lot of scope for a further rally in the rupee, 53.35 was a crucial support and now the next support is closer to 53," said Naveen Raghuvanshi, associate vice-president with Development Credit Bank.

"Over the next fortnight, the rupee may touch 53 if not break it, as there will be lot of dollar demand emerging around that mark. Broadly, the rupee should hold in a 53.10 to 53.40 range tomorrow."

The partially convertible rupee closed at 53.2150/2250 per dollar versus its previous close of 53.30/31. It earlier hit 53.07, its strongest since Oct. 18. The rupee posted its first monthly gain in four and is the best-performing currency in Asia so far in 2013.

Traders, however, said there was strong resistance seen due to residual month-end dollar demand from importers, while oil firms were also seen buying aggressively as current levels are attractive.

Domestic shares fell on Thursday, led by ICICI Bank , which was hit by profit-taking after beating forecasts with its quarterly earnings.

Investors are now focusing on the budget for the next fiscal year to be unveiled in late February. Finance Minister P. Chidambaram has promised to stick to the government's fiscal deficit targets.

The Indian government will shed 10 percent in Oil India through an auction on Friday, ahead of a stake sale in NTPC on Feb. 7.

"The fireworks are likely to start tomorrow with respect to dollar inflows," Development Credit Bank's Raghuvanshi said.

India's fiscal deficit during the April-December period was 4.07 trillion rupees ($76.22 billion), or 78.8 percent of the budgeted full fiscal year 2012/13 target, government data showed on Thursday.

The possibility of India losing its investment grade credit rating has receded somewhat as a result of economic reforms by the government since last September, an analyst with rating agency Standard & Poor's told Reuters on Thursday.

In the non-deliverable forwards, the one-month contract was at 53.44, while the three-month was at 54.01.

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 around 53.4050 with total traded volume of $5.5 billion. (Editing by Prateek Chatterjee)

FILED UNDER:

Reforms Push

REUTERS SHOWCASE

Reuters Exclusive

Reuters Exclusive

India looks to sway Americans with nuclear power insurance plan  Full Article 

To Boost Growth

To Boost Growth

Crank up public spending to revive growth - chief economic adviser.   Full Article 

Bold Steps

Bold Steps

SpiceJet rescue plan marks bold bet on Indian aviation recovery.   Full Article 

New Airline

New Airline

Tata, Singapore Air venture Vistara to take off on Jan 9.  Full Article 

Online Sales

Online Sales

Knock knock. Who's there? Amazon's best-selling holiday author.  Full Article 

26/11 Plotter

26/11 Plotter

Pakistan to challenge bail for Mumbai attack "mastermind".  Full Article 

Chinese Economy

Chinese Economy

China revises up size of 2013 economy, sees no effect on 2014 growth.  Full Article 

Reuters Poll

Reuters Poll

BSE Sensex to hit 32,980 by December 2015  Full Article 

Reuters India Mobile

Reuters India Mobile

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