MUMBAI: The rupee strengthened to its highest level in a week on Friday boosted by a return of some risk appetite globally after a slew of strong data in Europe, but traders would watch European banks' stress test results for cues.
In an effort to calm investors' jitters over the potential impact of the euro zone debt crisis on Europe's banking system, regulators are assessing how 91 banks across Europe would cope with another economic downturn, and the results are expected to be published on Friday.
By 11 a.m. (0530 GMT), the partially convertible rupee was at 46.99/47.00 per dollar, after opening at the day's high of 46.95, and 0.3 per cent stronger than Thursday's close of 47.1250/1350. "The market is likely to be active till noon after that it will probably gap out. There is only some oxygen being provided by the global markets to sustain till policy on Tuesday," the chief dealer with a state-run bank said. "The unit should trade in a range of 46.90-47.15 today and the stress test results will be watched, but no one is seriously very concerned about them now. Unless they are really negative, they are discounted."
The euro steadied against the dollar on Friday, retaining gains made in the previous day on strong euro zone data and US corporate earnings. The index of the dollar against six major currencies was down 0.1 per cent and would be watched for direction during the day. Most Asian units too rose against the dollar.
Shares rose 0.5 per cent in early trade on Friday, with Reliance Industries leading the rise, taking cues from strong world markets. Shares are watched for cues on direction of fund flows which have a large impact on the rupee's fortunes as well.
So far this year, foreigners are net buyers of $8.8 billion worth of shares. Last year's record $17.5 billion inflow had helped the rupee gain 4.7 per cent. The rupee is forecasters' top bet for appreciation among BRIC currencies, a new Reuters survey shows, as the growing economy draws foreign investors.
One-month offshore non-deliverable forward contracts were quoted at 47.23, 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 47.0075, with the total traded volume on the two exchanges at about $1.1 billion.
