Rupee erases losses on stronger equities

A man uses an electronic machine to check a currency note at a money exchange shop in the eastern Indian city of Siliguri in this May 18, 2009 file photo.

MUMBAI (Reuters) - The rupee erased early losses to close stronger on Thursday tracking local equities and stoked a bullish near-term outlook for the local currency.

The rupee had touched an intraday low of 47.25, after the main share index fell as much as 2.2 percent earlier in the day and as the dollar strengthened overseas.

The partially convertible rupee ended at 47.0150/0250 per dollar, off the day's peak of 46.9925, and slightly above Wednesday's close of 47.05/06.

"The outlook is bullish for the rupee in the near term. I see it in the 46.80-46.90 range in a day or two," said a senior trader at a private bank.

Indian shares climbed nearly 1 percent erasing earlier falls, with telecom stocks among the gainers, as bargain hunters stepped in towards the close.

Net purchases of more than $14 billion shares by foreigners so far in 2009, reversing outflows of more than $13 billion in 2008, have been a key factor supporting the rupee, which touched a record low of 52.2 in early March. Earlier today, the dollar and yen rose as the euro and perceived higher risk currencies succumbed to profit-taking ahead of policy decisions by the Bank of England and the European Central Bank.

The dollar index, a gauge of the U.S. unit's performance versus six majors, was up 0.2 percent.

The U.S. Federal Reserve on Wednesday expectedly closed out a two-day meeting with a decision to keep benchmark overnight rates in a range of zero to 0.25 percent and expressed growing confidence an economic recovery was building in the world's biggest economy.

One-month offshore dollar/rupee non-deliverable forward contracts were quoting at 47.02/12, little changed from the onshore spot rate.

In currency futures, the most traded near-month contracts on National Stock Exchange and MCX-SX were at 47.06 and 47.0650 respectively, from Wednesday's 47.1350 and 47.1450 close.

(Editing by Malini Menon)

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