Rupee ranged on choppy euro; RBI policy review in focus
The rupee treaded water on Monday weighed by a choppy euro and dollar demand from local oil importers, with most traders preferring to stay on the sidelines a day prior to the central bank's policy review.
July 25, 2011 / 20:08 IST
The rupee treaded water on Monday weighed by a choppy euro and dollar demand from local oil importers, with most traders preferring to stay on the sidelines a day prior to the central bank's policy review.
The partially convertible rupee ended at 44.3950/4050 per dollar, 0.09% weaker than its Friday's close of 44.3625/3725, after moving in a narrow 44.3800-44.4350 band intra-day."Why should people take risks until there is clear view on where interest rates are headed? There is a view in the market the Reserve Bank of India (RBI) could pause on rates on Tuesday," said Naveen Raghuvanshi, an associate vice president at Development Credit Bank."So we could see the rupee in a thin range on Tuesday till the policy is released."View the RBI may be near the end of its credit tightening cycle have strengthened as the 10 interest rate increases since March 2010 take a toll on growth in a once-roaring economy.A Reuters poll of economists last week too predicts the RBI will raise repo rate by 25 basis points on Tuesday and once again by the end of the year, before pausing its long rate tightening campaign.But after market hours on Monday, RBI said high inflation warrants continued tight monetary policy despite rising risks to growth.The euro was at USD 1.4374 versus USD 1.4402 at close of forex trade on Friday and the index of the dollar against six major currencies was down 0.14% at 74.096 points.Although the euro was choppy, the hazy outlook on the dollar due to the lack of progress in reaching a deal to raise the US debt ceiling limited pressure on the rupee, traders said.On Sunday, a sharply divided US Congress pursued rival budget plans that appeared unlikely to win broad support, pushing the country closer to a debt default that would reverberate around the world.The BSE Sensex shrugged off weak world equities and firmed 0.8% to their highest close in more than two weeks on Monday, as telecom stocks rallied in huge volumes on hopes tariffs will rise and improve margins. [.BO]Oil is India's biggest import item and domestic oil refiners are the biggest purchasers of the US unit in local forex market. Typically, their demand tends to peak towards the end of every month when payments fall due.The one-month onshore forward premium was at 24.75 points versus 23.50 points on Friday, while the three-month was at 71.75 points from 72.25 points and the one-year was at 232.75 points versus 234.25.One-month offshore non-deliverable forward contracts were quoted at 44.54, weaker than the onshore spot rate.In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange were at 44.4025, while on the MCX-SX and the United Stock Exchange were both at 44.4075. The total volume stood at USD 8.80 billion. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
