* Rupee ends at 53.85/86 per dlr vs 53.8450/8550 on Mon
* Onshore 1-yr fwd dlr premium rises to over 14-yr high
* Heavy dlr demand from oil firms, importers hurts rupee
By Swati Bhat
MUMBAI, Feb 12 The Indian rupee ended largely
steady on Tuesday after dropping to its lowest in three weeks
earlier as data showed a contraction in industrial output but
continued high consumer inflation raised uncertainty about how
aggressively the central bank would cut interest rates this
Continued heavy dollar demand from oil firms and other
importers also pressured the rupee on Tuesday, which fell for a
fifth consecutive session, its longest losing streak in two
Still, the local unit saw strong support at 54.00-54.05
levels, helping it to close off the day's lows.
Traders will now await the wholesale priced-based inflation
on Thursday for a clearer view on future rate cut prospects.
WPI-based inflation likely eased again in January to 7 percent,
its lowest level in over three years, according to a Reuters
"Oil firms were there in the market and we saw other
importers panic too. NDF was higher and the weak IIP data
triggered further weakness," said Vikas Babu Chittiprolu, a
senior foreign exchange dealer with state-run Andhra Bank.
"We saw some exporters come in to sell (dollars) in the last
hour. I expect 54.30 to be a strong support for the rupee,
holding the unit in a 53.40 to 54.30 range for the rest of the
week," he added.
The partially convertible rupee closed at 53.85/86
per dollar, after hitting 54.07, its weakest since Jan. 18 and
largely unchanged from its close of 53.8450/8550 on Monday.
India's industrial production unexpectedly shrank for a
second straight month in December, according to data on Tuesday,
weighed down by weak investment and consumer demand.
Separate data on Tuesday also showed consumer price
inflation inching up to 10.79 percent in January
from 10.56 percent a month ago.
That made it uncertain about whether the RBI would focus on
growth or on inflation. Central bank governor Duvvuri Subbarao
has added to this uncertainty by recently stressing the current
account deficit is another factor considered when formulating
The rupee on Tuesday was also pressured by good demand from
oil and gold importers looking to book imports at current
levels, fearing the rupee may drop further from here on.
A nuclear test by North Korea failed to have much impact on
global currency markets, although the yen fell slightly
after the Group of Seven industrialised countries reaffirmed
their commitment to market-determined exchange rates.
Onshore forward premiums also rose with the one-year premium
climbing to a more than 14-year high. The one-year rate
rose to 358 points, its highest since October 1998 and above its
close of 356 points on Monday.
In the offshore non-deliverable forwards, the one-month
contract was at 54.18 while the three-month was at 54.77.
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 54.04 with a total traded volume of $5.8 billion.
(Editing by Sunil Nair)