* Rupee ends at 53.71/72 per dlr vs 54.385/395 on Thurs
* INR posts biggest weekly gain in four months
* Diesel price hike, global risk-on boost sentiment
* INR may touch 51.50 levels in near term - advisory firm
By Swati Bhat
MUMBAI, Jan 18 The Indian rupee strengthened to
its highest level in two-and-a-half months on Friday, gaining
for a second straight week, as the government's decision to
partially deregulate diesel and a broad risk-on sentiment
globally boosted the currency.
The government's move, which came on Thursday, continued to
push up the local unit as it would help bring down the country's
yawning fiscal deficit in the medium to long term.
Traders said a broad risk-on mood following strong data in
the world's two biggest economies also cheered the rupee.
World shares hit a 20-month high as encouraging data from
the United States and China boosted prospects for the global
economy, while the yen hit new lows ahead of next week's Bank of
"The mood swing has happened for the better and we see the
sellers (rupee) in a state of panic. However, some buyers are
not letting the opportunity go and buying for the very near
term," said Satyajit Kanjilal, chief executive at Forexserve, a
forex and fixed income consultancy firm.
"The USD/INR overall has turned lower after the breakdown
below the key support at 54.50 on Thursday. Therefore, this
could be the beginning of a most unexpected rally taking the
dollar all way down to 51.50 and then may be even lower."
Traders said dollar bids from oil firms prevented the rupee
from gaining further.
The partially convertible rupee closed at 53.71/72
per dollar. The unit had closed at 54.3850/3950 on Thursday.
The unit rose for a second straight week, gaining 1.9
percent, its biggest weekly gain in four months.
India's BSE index closed above 20,000 for the first
time in two years on Friday, led by gains in state-owned oil and
Traders will monitor share moves for foreign fund flows
heading into the monetary policy later this month, when the
central bank is widely expected to cut rates by 25 basis points,
a Reuters poll found.
In the onshore forwards, the six-month premium rose to
185.75 points from 182.5, while the one-year premium rose to
338.25 points from 333.75 on Thursday.
In the offshore non-deliverable forwards, the
one-month contract was at 53.95, while the three-month was at
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 53.86
with a total traded volume of $7.44 billion.
(Editing by Prateek Chatterjee)