The rupee seesawed in volatile trade on Monday as banks unwound long dollars tracking its weakness against majors overseas ahead of twin market holidays, while losses in local shares capped gains.
At 10:30am, the partially convertible rupee was at Rs51.65/71 per dollar, off a low of Rs51.78, and little changed from its previous close of Rs51.63/65.
Last Tuesday, the rupee had dropped to an all-time low of Rs52.20.
“There has been some dollar selling interest seen among exporters around Rs51.75 but stocks will be watched for cues,” a senior dealer at a private bank said.
Indian shares fell more than 1% early in line with weak Asian markets and upcoming local holidays are likely to keep investors mostly on the sidelines.
Capital outflows have been a key driver of the rupee’s fall. Foreign investors have sold about $2.3 billion worth of shares in 2009 after dumping more than $13 billion in 2008.
Dealers said the dollar’s weakness against major currencies overseas helped the rupee strengthen to as much as Rs51.55.
The dollar dipped against the euro on Monday as investors trimmed safe-haven buying of the US unit after last week’s US payrolls data showed that job losses were less severe than many had feared.
“There is some selling coming in from banks, largely custodial banks, but there isn’t too much liquidity in the market,” a dealer with a foreign bank said. “It should trade in a Rs51.45 to Rs51.95 band largely”.
Traders said volumes were likely to be lower due to holidays ahead. Financial markets are shut on Tuesday and Wednesday for religious festivals.
One-month offshore non-deliverble forwards were quoting at Rs51.99/52.09, weaker than the onshore spot rate, indicating a bearish near-term outlook.
