Tuesday, May 18, 2010

Rupee pulls away from 2-month lows, shares help

The rupee pulled away from more than two-month lows on Tuesday as higher share prices raised expectations of more capital inflows, but lingering worries about euro zone's debt problems checked the local currency's gains. The partially convertible rupee was at 45.5350/54 per dollar, after dropping to 45.6950 in early trade.

It had closed at 45.62/63 on Monday after falling to 45.77 during trade, its weakest since March 5. The benchmark BSE share index was up about 0.5 percent, recovering from intraday losses, mirroring a recovery in European markets. The benchmark has dropped over 3.6 percent so far this month, with foreign funds pulling out around $665 million from Indian equities. Still, they have invested a net of about $5.9 billion so far in 2010, adding to a record $17.5 billion last year.

The euro was near a four-year low against the dollar as the euro zone's debt problems and fiscal tightening by governments raised worries on regional growth. One-month offshore non-deliverable forward contracts were quoted at 45.72, 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 at 45.5425 and 45.54 respectively, with the total traded volume on the two exchanges at about $5.7 billion.

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