Mumbai: The rupee clawed back 0.2% on Wednesday after falling more than 2.5% over six days, as shares rebounded and the dollar dropped after the Federal Reserve pledged to keep money easy for at least 2 years.
Traders said continuing demand for dollars from oil refiners to clear dues of around $4 billion to Iran could stall the recovery in the rupee, which had hit an 11-week low on Tuesday.
At 11:20am, the partially convertible rupee was at Rs. 45.09/10 per dollar, firmer than Rs. 45.205/215 at close on Tuesday when it had weakened as far as Rs. 45.40 during trade.
“Rise in equities is very positive for the rupee, but oil demand is very much present and may prevent a fast recovery,” said a senior foreign exchange dealer at a private-sector bank.
“The volatility has been too high in the past few sessions, so there is reluctance to take big risks.”
The benchmark share index was up 2% after tumbling almost 8% over a week to its lowest close in 14 months on Tuesday.
The US Federal Reserve on Tuesday took the unprecedented step of promising to keep interest rates near zero for at least two more years, adding it was considering further action.
It helped Wall Street post its biggest one-day gain in more than two years on Tuesday. The MSCI index of Asian stocks ex-Japan rose more 3.1% on Wednesday.
Global equity markets had been pummelled over the last few days after investors were forced to dump risky assets on concerns of a slowing world economy compounded by the shock of a downgrade of the US credit rating.
Traders said the rupee should trade in a 44.90-45.10 band for the day.
The index of the dollar against six major currencies was down 0.80% to 74.010 points, while the euro was firm at $1.4341.
The dollar index was at 74.448 points when the rupee closed on Tuesday and the single currency at $1.4259.
For a snapshot of Asian currencies, see
The one-month onshore forward premium was at 7.25 points from 14.75 on Tuesday, the three-month was at 32 points from 46.50 and the one-year onshore forward premium was at 129.50 points from 156.50.
One-month offshore non-deliverable forward contracts were quoted at 45.16, weaker than the onshore spot rate.
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 were all at 45.12. The total volume was at $4.67 billion.
