Rupee strengthens; shares, weak dollar aid

The rupee strengthened in morning trade on Wednesday aided by local share gains and the dollar's fall against major currencies, but high oil prices are seen limiting the rise.

At 11:50 a.m (0620 GMT), the partially convertible rupee was at 44.3925/3950 per dollar, 0.2% stronger than its previous close of 44.48/49.

"It opened up because stocks are strong and globally also things are good for risk appetite because euro has come back and dollar has taken a beating," a trader with a private bank said.

He sees the rupee trading in a range of 44.25-44.45 intraday.

Indian shares climbed 1% on Wednesday, taking cues from strong Asian markets and a normal monsoon forecast that could boost the outlook for the economy.

The index of the dollar against six major currencies was down 0.20% at 74.874 points. It had been at 75.245 points at the close of the local forex market on Tuesday.

The euro and commodity currencies, such as the Australian dollar, rebounded on Wednesday, as investors bought them again after a mild shake-out of stretched long positions at the start of the week.

But high oil prices are likely to weigh on the rupee, traders said.

Oil is India's biggest import item and domestic oil firms are the top purchasers of dollars in the local forex market.

Brent crude rose to USD 122 a barrel on Wednesday as a rebound in equities and a larger-than-expected draw on US oil product stocks helped ease fears over eroding demand.

The one-month onshore forward premium was at 26.00 basis points, compared with its previous close of 28.00. The three-month was at 84.75 basis points versus 83.50 and the one-year was at 321.25 basis points compared with 320.00.

The one-month offshore non-deliverable forward contracts were quoted at 44.65, 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 44.4325, while on the MCX-SX and the United Stock Exchange they were both at 44.4475, with total volume at USD 3.69 billion.