Rupee rises for 5th day, importer demand hurts

The rupee rose for the fifth consecutive session on Wednesday and touched its highest in more than two months, driven by robust dollar inflows and a rise in the euro, though dollar demand from oil importers tempered gains.

The rupee ended at 50.3750/3850 to the dollar, after rising to 50.38 -- its highest since November 14. It rose 0.7% from its Tuesday's close of 50.73/74.

"Sentiment is definitely positive for the rupee and inflows are happening," said Ashtosh Raina, head of foreign exchange trading for HDFC Bank.

Foreign funds bought about $3.02 billion of Indian debt so far in January and invested more than $854 million in equities, data from Securities and Exchange Board of India showed.

"There is also the fear of Reserve Bank of India intervention. So most people will not be comfortable going long (dollars)," Raina said. "The rupee may move to 48.60, but the time frame is difficult to gauge."

The RBI is suspected to have intervened intermittently in the foreign exchange market, the latest being on January 12 to help shore-up the rupee which touched a record low of 54.30 on December 15.

Data from the RBI last week showed it intervened in November in its biggest sale of dollars in over two-and-half years.

Recent measures by the government to raise the ceiling on foreign investment in debt, deregulation of interest rates on deposits by non-resident Indians, coupled with a government decision to raise the import duty on gold and silver was providing some support to the currency, traders said.

Steps taken by the RBI to reduce the scope for speculation in the currency market also continued to support rupee, they said.

European shares and the euro got a boost on Wednesday on talk the IMF may do more to help resolve the European debt crisis but worries over the outcome of crucial Greek debt restructuring negotiations limited any gains.

One-month offshore non-deliverable forward contracts were being quoted at 50.8, indicating some weakness in the short term in 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 all ended around 50.55 on total volume of $6.22 billion.