Re rises, closes below 50 as banks sell dollars

The Indian rupee gained On Thursday and closed at 49.85 against the dollar as banks offloaded the greenback following a rise in stock market indices.

In early trade on Thursday, the Indian currency reached 49.52 following selling of dollars by banks, but lost the gains as a result of dollar purchases by importers such as oil companies to meet their demand and cover their short positions.

This is the first time since November 26, when terrorists attacked Mumbai, that the rupee has closed below the 50-mark against the greenback. The three-day rising spree is the best run that the Indian currency has had in nearly a month. On Tuesday, the rupee had hit an all-time low of 50.65 against the dollar.

 

So far in 2008, the rupee has depreciated over 26 per cent against the dollar as foreign institutional investors (FIIs) pulled out money from Indian stock markets to meet the requirements in their home markets. Also, the dollar has gained against most international currencies.

In 2008, the rupee is the fourth worst-performing currency against the dollar after the Korean won, the Indonesian rupiah and the Pakistani rupee.

On Thursday, the Bombay Stock Exchange Sensex rose 5.51 per cent, while the National Stock Exchange’s Nifty went up 4.95 per cent, but FIIs were net sellers to the tune of $120.60 million. While FIIs have been net sellers in the equity market to the tune of $13.63 billion so far in 2008, in December their net sales are estimated at $57.70 million, according to data on the Securities and Exchange Board of India website.

Newswire 18 adds: Forward dollar-rupee premiums ended slightly firm, after moving in a thin band for a major part of the day, as some traders bought forward dollars for importers noting the rise in the spot rupee.

“Some importers booked forward dollars after the spot rupee rose sharply towards the end of trade,” said a dealer at a state-owned bank.

For a major part of trade, the one-year premium moved in a narrow range with most banks avoiding major forward-dollar positions, dealers said.

In early trade, the one-year premium fell to an intraday low of 1.68 per cent as some banks sold forward dollars on hope that the Reserve Bank of India may cut interest rates.

The benchmark one-year forward premium ended at 1.78 per cent compared with 1.74 per cent on Wednesday.