The Indian rupee gained on Tuesday, buoyed by sharp losses in the dollar versus major currencies, but choppy domestic shares and demand for the US unit from oil firms and importers limited any sharp upside. The partially convertible rupee closed at 45.09/10 per dollar, off its low of 45.2050 and 0.3 percent stronger than its close of 45.24/25 on Monday.
"The market was pretty dull today with just some oil demand seen," said a senior foreign exchange dealer with a private bank. "I expect more of a two-way market in early 2011. 44.80-46.00 band, probably with a broader range of 44 to 46.80. Capital inflows should continue but should just about make the current account gap manageable, which is why the rangebound rupee view."
One-month offshore non-deliverable forward contracts were quoted at 45.29, weaker than the onshore spot rate. In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX closed at 45.10, while those on the United Stock Exchange ended at 45.1025. The total traded volume on the three exchanges inclusive of all contracts was a low $3.7 billion versus a usual $7 billion.
India imports nearly two-thirds of its oil needs and refiners are the largest buyers of dollars in the domestic currency market, with their demand tending to peak at the end of each month when they are required to make payments.
Traders said gains in other regional peers also underpinned rupee sentiment. All Asian currencies rose compared to the dollar. The dollar's index against six major units too was down 0.8 percent at 79.746 points when the rupee market closed. The euro gained on Tuesday, recovering from recent weak levels, while the dollar came under broad selling pressure, hitting a three-week low against the yen and a seven-week low against the Australian dollar.
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