December 17, 2008 / 12:29 PM / 11 years ago

Rupee off 1-month high as shares fall

MUMBAI (Reuters) - The rupee retreated from one-month highs on Wednesday as local shares fell, but still ended stronger after the U.S. Federal Reserve lifted sentiment by slashing interest rates.

File photo of a garland made of Indian currency notes on display at a market in Srinagar November 20, 2006. REUTERS/Fayaz Kabli/Files

The partially convertible rupee closed at 47.67/69 per dollar, 0.5 percent higher than its previous close of 47.92/93. It rose to as much as 47.22 during trade, its highest since Nov. 10.

“The stocks were the culprit for pulling the rupee off its highs, but the short-term sentiment for the rupee is bullish,” said V. Kumar, chief dealer at State Bank of Travancore.

“The Fed rate cut did help the rupee initially, but we have to wait and see how far it turns out to attract more foreign institutional investor inflows,” he added.

The U.S. Federal Reserve on Tuesday broke into uncharted territory as it chopped benchmark interest rates to as low as zero and pledged to use “all available tools” to turn back a deepening recession.

Indian shares fell 2.6 percent on Wednesday after software major Satyam’s abandoned deal for two firms sparked concerns over corporate governance and prompted a larger bout of profit booking.

Foreign institutional investors have been net buyers of about $440 million worth of Indian shares so far in December, but have dumped a net $13.2 billion in 2008. They were net buyers of $17.4 billion last year.

Dealers said the dollar’s weakness against other major currencies also helped rupee sentiment.

The dollar fell broadly on Wednesday, hitting a 2-½ month low against the euro and heading towards a 13-year low versus the yen after the Fed move.

One-month offshore non-deliverable forward contracts were quoting at 47.79/94 per dollar weaker than the onshore spot rate.

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