Rupee wobbles between importer demand, euro hope

The rupee flip-flopped on Wednesday as traders juggled with oil importer demand for dollars and positive local shares, with hopes of concrete steps from Friday's European summit to resolve the region debt crisis also supporting sentiment.

At 11:28 am, the partially convertible rupee was at 51.48/49 per dollar, weaker from Monday's close of 51.41/42, after dipping to 51.53 in early trade. Indian markets were shut on Tuesday for a religious holiday.
Most traders expect the rupee to move in a 51.30-51.55 band during the session.
"Market is optimistic about Europe, but there is caution as well. So we could see currencies in a tight band," said a foreign exchange dealer with a large domestic company.
Asian shares and the euro gained on Wednesday on hopes that the threat of mass credit rating downgrades will pressure European leaders to come up with a convincing framework for resolving the euro zone debt crisis at a crucial summit later this week.
Standard & Poor's, which on Monday told 15 euro zone member nations that it may cut their debt ratings, fired a second shot less than 24 hours later, threatening on Tuesday to cut the credit rating of Europe's financial rescue fund.
"Rupee is going to move largely on actual demand-supply dynamics, with large position building being avoided till some firm signal from the European Union summit on crisis resolution," said Naveen Raghuvanshi, an associate vice-president of forex trading at Development Credit Bank. "So, the rupee is likely to see some resistance around 51.35."
Traders said the central bank's assurance that it would prevent the rupee from falling sharply by intervening in the forex market would also prevent any sharp decline in the local currency.
The rupee, weighed by a surging oil import bill and widening trade deficit, had touched a record low of 52.73 on November 22 and still remains the worst performing currency among Asian peers so far this year.
The one-month offshore non-deliverable forward contracts were quoted at 51.84, indicating a bearish near-term outlook.
The one-month onshore forward dollar premium was at 27.75 points from 27.50 on Monday, the three-month was at 71 points from 70, and the one-year premium was at 218 points, from 211.
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 were all at 51.6875. The total volume was at USD 1.12 billion.