Rupee gains in thin trade, foreign banks sell dollars

The rupee rose marginally on Wednesday in lacklustre trade as a nationwide bank strike affected volumes, but small dollar sales from some foreign banks and a steady euro help the local unit notch up some gains.

Bank transactions and some market operations were hit after about one million bank employees began a two-day strike to protest against reforms that will give investors more clout in the tightly controlled sector.

Dealers said the euro, which remained near seven-week highs, helped rupee sentiment given continued expectations euro zone policy makers are readying action to stem the debt crisis.

"Nationalised banks stayed away but volumes have been reasonable. There were some good supplies from foreign banks. Tomorrow again the strike continues, so supplies would be key in keeping the market active," said Paresh Nayar, head of fixed income and forex and First Rand Bank.

The partially convertible rupee closed at 55.4950/5050 per dollar versus the SBI closing rate of 55.5650/5750 on Tuesday.

State Bank of India, one of the biggest players in the domestic currency market, did not execute trades due to the strike, removing a big chunk of volumes from the market, according to market sources.

Traders broadly expect a range of 55.40 to 55.75 on the pair for the rest of the week.

The one-month offshore non-deliverable forward contracts were quoted at 55.80 while the three-month were at 56.49.

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 around 55.50, at a total traded volume of $3.8 billion.