Rupee ends off lows, euro's rise against dollar aids

The rupee weakened on Tuesday as dollar demand from oil importers and negative shares weighed, but it ended off the day's low tracking the euro's gains against the greenback.

The partially convertible rupee closed at 44.51/52 per dollar after dropping to 44.6225 earlier in the day. It had closed on Monday at 44.485/495.
Traders expect the Indian unit to be volatile on Wednesday ahead of the US Federal Reserve's rate decision due around 1630 GMT.
"The Fed decision is there. So the rupee should be volatile due to position adjustments," said Ashtosh Raina, head of forex trading at HDFC Bank in Mumbai.
He expects the rupee to trade in a range of 44.40-44.70 per dollar on Wednesday.
Month-end dollar demand from oil importers dragged the rupee down. Oil is India's biggest import item and domestic oil refiners are the largest dollar purchasers in the local forex market.
Oil bounced from earlier losses on Tuesday on low trading volumes as some investors took advantage of the dip to buy, though gains were limited ahead the Fed's policy meeting.
Indian shares fell 0.2% in a volatile session, with investors uneasy ahead of the central bank's policy statement next week when it is widely expected to raise interest rates again as it continues its battle with inflation.
However, the rupee recovered from its day's low after the euro hit a 16-month high against the dollar, helped by demand from sovereign investors.
The euro was at USD 1.4607 at the close of the local forex trade.
The index of the dollar against six major currencies was down 0.10% at 73.918 points at the close of local markets.
The one-month onshore forward premium was at 28.75 basis points (bps) versus its previous close of 26.25. The three-month was at 82.50 bps versus 83.00 bps and the one-year was at 318.00 bps compared with 318.75 bps.
The one-month offshore non-deliverable forward contracts were quoted at 44.76, weaker than the onshore spot rate.
In the currency futures market , the most traded near-month dollar-rupee contracts on the National Stock Exchange, the United Stock Exchange and the MCX-SX were at 44.5275, 44.5250 and 44.5350, respectively, with total volume at USD 9.54 billion.