Rupee pares gains after hitting 46/dlr

By Anurag Joshi

MUMBAI (Reuters) - The rupee rode a rising sharemarket and a weakening dollar to reach its highest in nearly a month on Monday, but then unwound most of the gains on a sudden surge in demand for the U.S. unit from importers.

The partially convertible rupee ended at 46.20/21 per dollar. That was off an early high of 46.0, its strongest since Oct. 20, but still 0.2 percent stronger than Friday's close of 46.31/32.

On Friday, the rupee had fallen to 46.75 during trade, its weakest since Nov. 6.

"Many banks sold dollars in the morning, but were forced to cover the short positions as importers began buying in the market," said a senior trader with a foreign bank.

The rupee had strengthened as the main BSE share index climbed more than a percent to its highest close in nearly a month, powered by optimism about the economy.

Foreigners have bought $15 billion of shares so far in 2009, after selling more than $13 billion last year. The inflows have helped the rupee recover from a record low of 52.2 in March.

One-month offshore non-deliverable forward contracts were quoting at 46.14/24, stronger than the onshore spot rate, suggesting a bullish near-term outlook.

In currency futures, the most traded near-month contracts on the National Stock Exchange and MCX-SX were at 46.26 and 46.2550 per dollar respectively, strengthening from Friday's 46.3925 and 46.3950.