The Indian rupee reversed early gains and slipped on Monday as dollar demand from oil firms and importers outweighed the positive sentiment due to weakness in the US unit versus major currencies overseas. The partially convertible rupee closed at 45.24/25 per dollar, off its high of 45.0750 and 0.3 percent weaker than its close of 45.11/12 on Friday.
"Dull markets today, did not hear of any major outflows. Market was quite illiquid but there was small amount of oil related dollar buying," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank. Most Asian currencies gained versus the dollar, which helped limit sharp losses in the rupee.
Indian shares closed 0.2 percent lower as investors locked in some gains, riding on an early rise in a market that had hit a six-week closing high last week, with little direction coming from world markets ahead of the year end. In this month until Friday, foreign funds had pulled out a net $558.55 million from Indian equities. They have, however, pumped in a net $28.4 billion so far this year on top of the $17.5 billion invested last year.
"I think thin year-end liquidity is leading to an exaggeration in moves as oil firms buy dollars. I am broadly looking at a 45.00-45.50 band this week with a bias for 45.50, but choppy trade is likely," said a senior foreign exchange dealer with a private bank. One-month offshore non-deliverable forward contracts were quoted at 45.43, 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 United Stock Exchange closed at 45.2525, 45.2575 and 45.2550 respectively, with the total traded volume on the three exchanges at a low $3.9 billion versus an average of $7 billion.
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