MUMBAI: Rupee recovered some of its early losses on Friday, tracking local shares, on expectations of likely central bank support in case of any steep fall, with hopes of a rebound in the euro also aiding. The government's decision late Thursday to liberalise investment in India's retail market also supported the rupee, traders said. India threw open its $450 billion retail market to global supermarket giants, approving its biggest reform in years that may boost sorely needed investment in Asia's third-largest economy. Market participants believe the Reserve Bank of India probably sold dollars on two occasions after the local unit touched an all-time low of 52.73 per dollar on Tuesday. At 11:57 a.m. (0627 GMT), the partially convertible rupee was at 52.15/16 per dollar, weaker from Thursday's close of 52.065/075, but above the day's low of 52.2525. "52.50 has become like a psychological barrier for the market as the feeling is that the RBI was standing strong around that level," said Naveen Raghuvanshi, an associate vice-president of forex trading at Development Credit Bank. "Market will definitely position itself on the retail liberalisation news. But it has to first reflect in the equities and flows have to be seen." The RBI's move earlier this week to boost dollar supply by raising the cap on interest rates for deposits by non-resident Indians and easing corporates' overseas borrowing rules have offered a much-needed relief for the rupee, traders said. "People expect some reversal in euro and hence some dollar selling is taking place here. Trendline support for the euro is around $1.3280," said a dealer with a private bank. The euro was at $1.3306 from $1.3383 at end of rupee trade on Thursday, while the index of the dollar against six major currencies was at 79.259 points from 78.855 points. However, the outlook for the rupee remains bearish. "We expect the Indian rupee to continue to underperform Asian currencies given India's current account deficit, limited capital inflows and the RBI's relatively hands-off approach to foreign exchange management," said Barclays Capital in a research note. Barclays also sharply revised its one-month forecast on the rupee to 54.00 from 48.50. The rupee has fallen nearly 16.9 percent from its highest point in 2011 and is the worst performer among major Asian peers. The one-month offshore non-deliverable forward contracts were quoted at 52.5, indicating a bearish short-term view on the on-shore spot rate. The one-month onshore forward dollar premium was at 25.25 points from 28.25 on Thursday while the three-month was at 56.50 points from 62.5 points, and the one-year premium was at 146.75 points from 160.75 points. 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 52.19. The total volume was at $1.70 billion.

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