Rupee gives up gains as refiners buy dollars

The rupee erased early gains on Friday hurt by dollar buying from oil refiners and importers, but losses in the greenback versus other majors kept a lid on further weakness.

Oil is India's biggest import and refiners are the largest buyers of dollars in the domestic currency market with their demand tending to peak towards month-end when they make payments.

"Spot moves are fairly stable but forwards are moving continuously higher everyday due to customer interests and tight liquidity," said Paresh Nayar, head of fixed income and forex trading at First Rand Bank.

One-year forward premium was at 294.25 points compared with 291 points at previous close.

 

At 10:50 a.m., the rupee was at 50.28/50.29 to the dollar, after strengthening to 50.16 in early trades. It closed at 50.25/26 on Thursday.

The rupee has risen 2.5% against the dollar so far this week. If it holds those gains, the currency will have its largest weekly gain since the last week of October, according to Thomson Reuters data.

Recent measures by the Reserve Bank of India to curb corporate and interbank speculation and opening up the dollar supplies from non-resident Indian and foreign investors have accelerated dollar inflows and will lend support to the currency, traders said.

Robust gains in Indian shares, with the country's No. 3 software services exporter, rallying 3.5% after its quarter earnings almost met market expectations, will keep hopes of inflows intact, added traders.

Gains in Asian shares and a firmer euro after successful bond sales in Spain and France will boost risk sentiment and aid the rupee, traders said.

Investors turned sharply bullish on most emerging Asian currencies in the last two weeks, especially the Indian rupee and the Indonesian rupiah, a Reuters poll showed on Thursday.

One-month offshore non-deliverable forward contracts were being quoted at 50.27, 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 were around 50.40 on total volume of $771 million.