Apr 13, 2012, 12.36 PM | Source: Reuters
The rupee was pushed off its early highs on Friday due to strong dollar demand from domestic oil refiners and the choppy domestic stock market.
Mixed signals on the global economic growth also clouded the outlook with underlying sentiment remaining jittery, traders said.
China's economy grew at its weakest pace in nearly three years in the first quarter, with the annual rate of expansion slowing more than expected to 8.1 percent while Italy's debt auction witnessed strong demand.
At 10:29 a.m. (0459 GMT), the rupee was at 51.40/41 to the dollar, after hitting a high of 51.33 earlier. It closed at 51.580/585 on Thursday.
"Oil (companies' dollar) buying emerges at every level as soon as some strength is seen in the rupee," said a senior currency trader at a state-owned bank.
"Equities are also turning volatile. The crucial resistance for rupee is around 51.30 levels, which, if broken, could lead to some more gains in it."
But most traders do not expect a sharp sustained rise in the rupee due to the global economic situation and fundamental domestic weaknesses like a rising current account deficit and slowing growth along with high inflation.
The February industrial output numbers released on Thursday were weaker-than-expected and have bolstered hopes of a rate cut from the Reserve Bank of India next week.
Traders believe the central bank's rate action and statement could also provide some clues about capital flows, which have come under a cloud due to proposed tax changes by the government.
The one-month offshore non-deliverable forward contracts were at 51.77.
In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and on the United Stock Exchange were all around 51.56, on a total volume of $825 million.