The Indian rupee weakened on Friday as dollar demand for defence purchases and some unwinding of short euro asia positions in the non-deliverable forwards market weighed. The partially convertible rupee closed at 46.80/81 per dollar, off the day's low of 46.8350 but still 0.4 percent weaker than Thursday's closing of 46.60/61. The unit dropped 0.3 percent on the week.
The onshore dollar premiums had edged higher earlier in the day as liquidity in the banking system continued to stay tight, while traders also braced for a possible rate hike at the upcoming monetary policy review on July 27. The one-year onshore dollar premium rose to as much as 160.75 points before closing at around 155.75 points. It had closed Thursday at 154.25 points. Mild gains in the stock market prevented the unit from slipping sharply, dealers said.
One-month offshore non-deliverable forward contracts were quoted at 46.99, weaker than the onshore spot rate, suggesting a bearish near-term outlook. In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX closed at 46.8450 and 46.84 respectively, with the total traded volume on the two exchanges at about $3.6 billion.
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