The Indian rupee strengthened on Tuesday on hopes the government would kick-start long-awaited fiscal reforms by hiking fuel prices, but further gains were prevented by dollar demand from oil firms and a week full of key events. "The outlook for the rest of the week depends on the German court ruling and the IIP number. I expect the German court to clear the ESM bill but with strict conditions," said Sameer Lodha, managing director at QuantArt Market Solutions.
The unit closed at 55.34/35 per dollar as per the SBI closing rate, slightly stronger than its close of 55.44/45 on Monday. The unit moved in a band of 55.3450 to 55.54 during the session, with dollar demand from oil importers capping any stronger gains in the rupee.
In the offshore non-deliverable forwards, the one-month contract was at 55.61 while the three-month was at 56.23. The USD/INR premium in the currency futures market, especially in the six-month tenor, is sharply below the onshore forward market and provides a good opportunity for importers to hedge their six-month forward payments, analysts said. In the currency futures market, the most-traded one-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 55.47 with a total traded volume of around $2.76 billion.