Rupee logs biggest single session gain in nearly 11 months

The rupee logged its biggest single session gain in nearly 11 months on Friday, buoyed by strong foreign fund inflows into local shares as EU leaders' efforts to contain the euro zone debt crisis stoked appetite for riskier assets.

However, dollar demand from oil importers prevented a sharper rise in the rupee, traders said. Oil is India's largest import item and oil refiners are the biggest buyers of dollars in the local market.

The partially convertible rupee ended at 48.7550/7650 per dollar, 1.5% stronger than Tuesday's close of 49.51/52, after rising to 48.7350, a level not seen since Oct. 17. It posted its largest single session gain since Dec. 1, 2010.

The BSE Sensex was closed on Wednesday and Thursday for religious holidays.

The Sensex logged its biggest weekly gain in nearly two months on Friday, bolstered by gains in financials as hopes of an end to the monetary policy tightening cycle in Asia's third-largest economy drew investors back into beaten down stocks. The main stock exchange ended up 2.98% higher.

Traders said 48.65 could be a strong resistance level for the rupee in the near-term.

"48.65 break takes it down to 48.30, but it looks tough as of now. The euro sustaining at the current levels looks difficult," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.

"And moreover, too much of positives have already been factored in."

The euro eased on Friday from a seven-week peak scaled following a summit deal on Europe's debt crisis.

The euro remains vulnerable as the EU still needs to find the money for the newest version of its bailout fund, with doubts lingering on whether its new size of around 1 trillion euros (USD 1.4 trillion) will be enough to staunch the crisis.

The euro was at USD 1.4148 at the end of local trade on Friday after touching the day's high of USD 1.4200, while the index of the dollar against six major currencies was at 75.079 points from 74.879 points previously.

Demand for dollars tends to peak towards month end when oil importers are required to make payments for their purchases.

Brent crude oil fell more than USD 1 per barrel to USD 111 on Friday as investors took another look at the details of a financial rescue plan for the euro zone, which has helped boost oil prices this week.

The one-month onshore forward premium on the rupee was at 24.75 points from 25 on Tuesday, the three-month premium was at 65.50 points from 63.50 and the one-year premium was at 159.75 points, from 148.

The one-month offshore non-deliverable forward contracts were quoted at 49.04, weaker versus the spot rupee rate.

In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and the MCX-SX were both at 49.0100, while those on the United Stock Exchange were at 49.0200. The total traded volume on the three exchanges was USD 3.63 billion.