MUMBAI The rupee hit a one-week low on Wednesday, weighed down by losses in other Asian currencies and shares but good dollar inflows for a share sale helped the unit recover to end marginally higher on the day.
Reliance Communications Ltd on Wednesday raised $804 million by selling shares, people involved in the process said, in what is the single biggest equity issue since the pro-business Narendra Modi government took office.
Dealers said the central bank has been persistently spotted buying dollars in the market to prevent dollar inflows from pushing the rupee sharply higher.
Foreign funds have bought shares worth $2.3 billion and debt worth $2.98 billion so far in June, taking total inflows in the year to $9.9 billion and $10.6 billion in each of the two segments.
Most emerging Asian currencies eased on expectations of higher dollar demand for oil imports given worries that the intensifying Iraq crisis will disrupt crude supplies from the world's second-largest OPEC producer.
India imports two-thirds of its oil needs and higher crude prices can affect the country's current account deficit, while also pushing up domestic inflation.
Traders expect the market to be range-bound until the federal budget on July 10.
"The budget is the next key event. The market will await the fiscal deficit numbers but it may not have a big impact on the rupee as such," said Pramod Patil, assistant vice-president, forex and fixed income at United Overseas Bank.
"I expect the rupee to be in a range of 59.70 to 60.55 per dollar range with a bias towards dollar-buying due to the month-end demand and the Iraq issue," he added.
The partially convertible rupee closed at 60.1250/1350 per dollar compared with 60.1325/1425 on Tuesday. The rupee dropped to as much as 60.3850 during the session, its lowest since June 18.
Traders will continue to monitor the evolving global geopolitical situation and the domestic share market for clues in the near-term.
The BSE Sensex and Nifty fell on Wednesday for a fifth session in six, with blue-chips such as Reliance Industries Ltd taking a hit as caution ahead of expiry of June derivatives on Thursday and fears of more violence in Iraq prompted investors to pare positions.
In the offshore non-deliverable forwards, the one-month contract was at 60.48, while the three-month was at 61.07.
(Reporting by Swati Bhat; Editing by Prateek Chatterjee)