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Rediff.com  » Business » Rupee hits 1-week high as foreign banks continue to sell dollars

Rupee hits 1-week high as foreign banks continue to sell dollars

Last updated on: September 26, 2013 18:33 IST

Rupee trims initial gains vs dollar, still up 17 paise

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Swati Bhat in Mumbai

The rupee gained for a second straight session to touch its highest level in nearly a week on Thursday as foreign banks sold dollars in the spot market while squaring off their long dollar positions in the offshore non-deliverable forwards.

Traders said the large selling seen from foreign banks over the last couple of days was mainly due to offshore flows with banks preferring to not roll-over their long dollar outstanding contracts in the non-deliverable forwards. Some foreign banks were also selling dollars in anticipation of inflows with some technology service exporters, two dealers said.

"There was huge selling by foreign banks today, possibly for balance sheet management," said Uday Bhatt, a foreign exchange dealer with UCO Bank.

The settlement date for today's trade would be September 30, the last day of the first half of the fiscal year.

"If 61.80 is broken strongly, then we can see 60 soon," Bhatt added.

The partially convertible rupee closed at 62.07/08 per dollar compared with 62.44/45 on Wednesday.

The unit moved in a range of 61.98 to 62.37 during the session.

Rupee graphicTraders said gains in other Asian currencies and the domestic share market also helped sentiment.

Thai baht led gains among emerging Asian currencies though investors hesitated to make heavy bets on regional units amid caution over a deadlock in the U.S. budget deal.

The BSE Sensex edged higher, despite volatility caused due to expiry of the September equity derivative contracts, led by gains in Sun Pharma which rose to an all-time high on hopes of higher sales of a key cancer drug.

Earlier in the day, the Reserve Bank of India's decision to allow greater flexibility to banks in swapping their overseas borrowings also helped.

The RBI late on Wednesday relaxed the minimum maturity tenure for banks' foreign currency borrowings' to one year from three years, in order to use the central bank's swap facility which was set up to support the ailing rupee.

In the offshore non-deliverable forwards, the one-month contract was at 62.76 while the three-month was at 63.86.

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 all closed at around 62.56 with a total traded volume of $1.92 billion.


Photographs: Reuters

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