Rupee ends off 10-week high on importer demand

By Aditya Phatak
MUMBAI (Reuters) - The rupee erased most of its intraday gains on dollar demand from oil refiners on Tuesday, after hitting a 10-week high, driven by local shares that rose on expectations the RBI will shift its policy towards boosting growth.
The partially convertible rupee settled at 50.07/08 to the dollar, easing from a high of 49.9250, its highest since November 14. It had closed at of 50.09/10 on Monday.
"Overall bidding interest for dollars was there through the day especially from oil importers for month-end payments," said Vikas Chittiprolu, a senior foreign exchange with Andhra Bank.
Oil is India's largest import item and oil refiners, the largest buyers of dollar in the local market, step up demand towards the end of every month to meet payment requirements.
Traders said comments from the Reserve Bank of India underlined its intent to keep volatility in the foreign exchange market under control.
RBI Governor Duvvuri Subbarao said financial markets should not be under the impression that recent administrative steps that authorities have taken to curb speculation in foreign exchange are temporary.
"The clear message seems to be that the market should not hold too many long-dollar positions," said a foreign exchange dealer with a large private-sector bank.
The central bank has been intervening in the foreign exchange market to support the rupee, which slumped to a record low of 54.30 to the dollar in mid December.
The RBI and the government have also taken other steps to support the currency, including liberalising interest rates for bank deposits held by non-resident Indians as a way to encourage dollar inflows.
The RBI cut the cash reserve ratio by 50 basis points to 5.50 percent to ease tight liquidity, but held key rates steady as core inflation remains stubbornly high.
The BSE Sensex ended 1.46 percent higher.
One-month offshore non-deliverable forward contracts were quoted at 50.5, 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 50.13 on total volumes of $5.63 billion.
(Editing by Aradhana Aravindan)