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Rupee hits 3-1/2 month highs; oil demand limits gains
January 30, 2013 / 4:43 AM / 5 years ago

Rupee hits 3-1/2 month highs; oil demand limits gains

MUMBAI (Reuters) - The rupee strengthened to its highest level in nearly three-and-a-half months on Wednesday, helped by dollar inflows for upcoming share sales and positive sentiment on the back of a strong euro.

An employee counts rupee notes at a cash counter inside a bank in Kolkata June 18, 2012. REUTERS/Rupak De Chowdhuri/Files

The government expects to raise more than $465 million by selling a 10 percent stake in Oil India Ltd (OILI.NS) on Friday, while an about $2 billion stake sale in power producer NTPC (NTPC.NS) is likely to take place on February 7.

The gains in the rupee came despite caution about whether the Reserve Bank of India will continue to cut interest rates after lowering the repo rate by 25 basis points on Tuesday. These worries have hit domestic bond prices, and capped share gains.

“The flows for the stake sales via qualified institutional placements and offer for sales which are in talks are helping the rupee. Exporters, too, are selling on expectations of more dollar supply,” said Vikas Babu Chittiprolu, a senior forex trader at state-run Andhra Bank.

“I expect the rupee to gain towards 52.50 in the next one-month,” he added.

An employee sorts rupee notes at a cash counter inside a bank in Agartala February 18, 2010. REUTERS/Jayanta Dey/Files

The partially convertible rupee closed at 53.30/31 per dollar, 0.9 percent stronger than its close of 53.76/77 on Tuesday. The unit rose as high as 53.28, its strongest since October 18.

Traders said the rupee benefited from a gain in the euro to 14-month highs against the dollar ahead of the Federal Reserve’s first policy meeting of the year. The Fed is widely expected to stick to its super-easy policy until U.S. unemployment falls sharply.

    Traders said larger gains in the rupee were capped by demand for the greenback from oil firms, the biggest buyers of dollars in the domestic currency market, whose demand peaks at the end of each month when they are required to make payments.

    In the offshore non-deliverable forwards, the one-month contract was at 53.53 while the three-month was at 54.10.

    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 53.52 with a total traded volume of $5.02 billion.

    Editing by Anand Basu

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