March 20, 2012 / 2:42 AM / 6 years ago

Rupee slightly weak on oil payment demand

MUMBAI (Reuters) - The rupee was marginally weaker on Tuesday as dollar demand from oil importers weighed, which offset gains from foreign fund inflows.

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

At 9:42 a.m. (0412 GMT), the rupee was at 50.2675/2750 to the dollar, compared with Monday’s close of 50.23/24, after moving in a 50.1850 to 50.2700 range so far in the day.

“Oil importers’ dollar demand is negating gains from foreign inflows,” said S. Nagarajan, head of forex dealing at Al Rostamani International Exchange.

“50.50 looks to be a very strong support for the rupee in the near-term and it is unlikely to weaken below that,” he said, adding exporters could sell dollars around that level.

The Reserve Bank of India is also likely to step into the market if there is big volatility, Nagarajan said.

The RBI sold a net $7.3 billion in January in the spot market, marginally lower than $7.8 billion in December.

Oil is India’s largest import item and oil refiners are the largest buyers of dollars in the local market. Brent crude hovered near $125 a barrel in Asian trade on Tuesday.

Traders said the local shares will be eyed for further clues. The BSE Sensex was was up about 0.5 percent in early trades.

The rupee is seen moving in a 50.05 to 50.45 range during the day, dealers said.

The one-month offshore non-deliverable forward contracts were at 50.71.

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 were all around at 50.4, on a total volume of $253 million.

Reporting by Shamik Paul; Editing by Subhadip Sircar

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