Rupee closes 3 paise higher at 54.78 on rally in equities

Rupee closes 3 paise higher at 54.78 on rally in equities Mumbai: A strong dollar weighed on rupee but the local currency managed to erase early losses and settle 3 paise higher at 54.78, amid signs of massive capital inflows.

The rupee commenced weak at 54.86 a dollar and moved down further a low of 54.91 at the Interbank Foreign Exchange (Forex) market on initial dollar demand from importers.

It, however, bounced back on rally in local stocks to a high of 54.65 a dollar before again falling back to end at 54.78 -- a rise of three paise or 0.05 percent over its previous closing of 54.81, a one-month low.

The dollar index was up by 0.43 percent against a basket of six major currencies as euro dropped against the dollar, after quarterly economic reports from France and Germany missed expectations, said analysts.

The Indian benchmark S&P BSE Sensex today zoomed by 491 points, or 2.49 percent, to a fresh 28-month high on hopes of rate cut by the RBI in its next monetary policy meeting.

FIIs pumped in a staggering Rs 1,646.95 crore (USD 300 million) in stocks today as per provisional BSE data.

Stocks rallied after Reserve Bank of India Governor D Subbarao said the central bank would take into account falling inflation while deciding on policy initiative in its review next month.

Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "Rupee was supported by good dollar inflows into Indian equities market. However, a strong dollar in the overseas market and a weak Euro after weak GDP numbers kept rupee in check. We expect rupee to trade in the range of 54.64 to 55.18 tomorrow."

"Rupee was seen tracking international factors while ignoring a sharp rally in the domestic equity markets. The fall of Euro below USD 1.29 levels after the poor GDP numbers from the periphery kept the rupee under pressure. Also, the strength in US dollar was seen contributing for the weakness in the rupee," said Abhishek Goenka, Founder and CEO, India Forex Advisors.

Meanwhile, the premium for the forward dollar recovered slightly on fresh paying pressure from banks and corporates.

The benchmark six-month forward dollar premium payable in October edged up to 160-162 paise from overnight close of 159-1/2-161-1/2 paise.

Far-forward contracts maturing in April also moved up to 321-1/2-323 paise from 319-1/2-321-1/2 paise.

The RBI fixed the reference rate for the US dollar at 54.7835 and for the euro at 71.7189.

The rupee improved further against pound sterling to 83.32 from previous close of 83.77 and also hardened against the euro to 70.47 from 71.02.

It also remained firm against the Japanese yen to 53.35 per 100 yen from last close of 53.92.