A late recovery helped the Indian rupee gain on Friday, as demand for global risk assets recovered after the euro extended gains on the back of falling yields for Italian and Spanish debt. However, the local currency still posted its third straight weekly decline as concerns about the global economy continue to weigh, especially after the Federal Reserve and the European Central Bank refrained from immediate action this week.
In India, the summer drought declared on Thursday is raising worries about food price inflation, and is exacerbating fears the government will delay meaningful fiscal reforms that are seen as key to the outlook for the rupee. "There were no flows as such in the market today, but rupee gained in late trade on the back of a rise in the euro and a recovery in local shares," said Hariprasad, head of treasury at the forex arm of Centrum Capital, who goes by a single name.
The partially convertible rupee closed at 55.75/76 per dollar as per the SBI closing rate versus its previous close of 55.84/85 after rising to as high as 56.19 in morning trade. The rupee still fell 0.8 percent for the week, as initial hopes for global monetary stimulus action were later dashed by the lack of concrete steps from either the Fed or the ECB.
The one-month offshore non-deliverable forward contracts were at 56.09 while the three-month was at 56.76. 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 all closed at around 56.09 with the total traded volume at around $3.5 billion.
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