Rupee rises to 3-wk highs as dlr tumbles

By Swati Bhat

MUMBAI (Reuters) - The rupee rose to its highest in nearly three weeks on Monday as it was lifted by the dollar's fall versus major units and gain of more than 2 percent gain in the sharemarket.

The partially convertible rupee closed at 46.46/47 per dollar, 0.75 percent above Friday's close of 46.81/82. It rose to 46.3550 during trade, its highest since Oct. 21.

"The dollar was getting pounded, the dollar index broke key levels," said Nitesh Kumar, an inter-bank dealer at Development Credit Bank.

"We have seen the September forward premium come down to 106.5 points today from around 125 points last week, so obviously there was some profit-taking."

The annualised dollar-rupee forward premium for September has narrowed to 106.5 points, implying a return of about 2.6 percent, much lower than the central bank's borrowing rate of 3.25 percent, prompting banks to pay forward dollars.

"I think a large part of volatility is behind us, things should stabilise around these levels," Kumar said.

Dealers said there was also a lot of dollar selling from offshore players. One-month offshore non-deliverable forward rupee contracts were quoting at 46.35/45, stronger than the onshore spot rate.

Banks with access to onshore and offshore markets can buy dollars at a cheaper rate offshore and sell them onshore to arbitrage the price differential.