The Indian rupee strengthened on Friday in cautious trade ahead of the US non-farm payrolls data, aided by local share gains, but dollar demand from oil importers limited the rise. The partially convertible rupee ended at 45.79/80 per dollar, 0.6 percent stronger than Tuesday's close of 46.085/095. It had moved in a 45.79-45.99 band intraday.
"The market was cautious ahead of the US non-farm payroll data, with participants trying to square their positions," said Vikas Chittiprolu, a senior forex dealer with Andhra Bank. Indian shares rose 0.9 percent, snapping five straight weeks of fall, to log their highest close in more than two weeks as investors continued with bargain hunting, shrugging off slower growth in new manufacturing orders in one of the worst performing markets in the world this year.
Expectations of another rate increase by the central bank on September 16, to tame high inflation, also aided the rupee, dealers said, adding higher rate differentials should attract more foreign funds looking for better returns. Indian markets were closed on Wednesday and Thursday for local holidays.
The one-month onshore forward premium was at 11.75 points from 7 on Tuesday, the three-month was at 37.75 points from 31.75 and the one-year stood at 134 points from 126. The one-month offshore non-deliverable forward contracts were quoted at 46.03, weaker than the onshore spot rate. 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 at 45.9225, 45.9250 and 45.9275 respectively. The total volume was at $5.6 billion.
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