Rupee gains as risk taking resumes globally

The rupee strengthened on Friday as shares climbed after risk appetite got a boost from China's calming comments on its investments in debt-ridden Europe, but the dollar's gains against majors limited the rise.

At 10:10 a.m. (0440 GMT), the partially convertible rupee was at 46.62/63 per dollar, 1.4% stronger than 47.29/30 at close on Wednesday. The market was closed on Thursday for a local holiday.

"China's statement lifted sentiment globally, but I did not really expect equities to rally so much," said Nitesh Kumar, an inter-bank dealer with Development Credit Bank. "The GDP data on Monday may be the next tipping point."

The People's Bank of China said a Financial Times report that the State Administration of Foreign Exchange (SAFE) was concerned about its exposure to euro zone debt was groundless, lifting global stocks.

% in the March quarter from a year earlier—it’s strongest since December 2007—the median forecast of 20 economists showed.

Most emerging market currencies were higher compared to the dollar. However, the index of the dollar against six major currencies was up half a %.

"Can't say exactly whether this is a trend reversal, but tensions have eased a bit," said Vikas Chittiprolu, a senior foreign exchange dealer at state-run Andhra Bank, predicting a 46.50-46.80 range for the day.

Indian shares rose more than 1 %, with Reliance Industries and ICICI Bank leading the rise, taking cues from firm world markets.

Foreign fund flows into and out of the sharemarket are a key trigger for the rupee. So far in May, foreigners have withdrawn USD 2.3 billion in their biggest monthly pullout since October 2008.

"Given the near-term bias for extension of gains both in EUR/USD and Sensex, the rupee should extend its gains into 46.50-46.65," said J. Moses Harding, head of global markets at IndusInd Bank.

The euro steadied on Friday, benefiting from a short-covering bounce after China assured investors it was not losing confidence in euro zone assets, while higher-yielding currencies held on to broad gains.

One-month offshore non-deliverable forward contracts were quoted at 46.71, weaker than the onshore spot rate.

In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were both at 46.76, with the total traded volume on the two exchanges at about USD 1.4 billion.

Source http://www.moneycontrol.com/news/rupee/rupee-gains-as-risk-taking-resumes-globally_460847.html