Rupee trims gains as euro debt woes linger

NEW DELHI: The rupee trimmed gains on Tuesday as a fall in European and local shares raised concerns about more foreign fund withdrawals, but the dollar’s losses against major currencies helped the unit notch up some gains.

The partially convertible rupee closed at 46.95/96 per dollar, off the day’s high of 46.8750, but still stronger than its close of 47.10/11 on Monday. “The dollar-rupee opened lower with a gap but then due to the Fitch comments, European equity markets fell and our markets followed too,” said Manoj Kumar, deputy manager, forex dealing, at State Bank of Travancore.

Ratings agency Fitch unsettled British investors after saying “the scale of the UK’s fiscal challenge is formidable and warrants a strong medium-term consolidation strategy — including a faster pace of deficit reduction than set out in the April 2010 budget.”

The dollar’s losses against major currencies, however, helped the rupee. The index of the dollar versus six major currencies, was down 0.1%. Indian onshore dollar premiums rose on the back of the rupee’s strength in the spot market, with tight cash conditions also exerting upward pressure.

One-year onshore dollar premium rose to 109 points, from 103.50 points at previous close. Dealers said importers and oil firms, the largest buyers of dollars in the local currency market, were also seen paying forwards.

One-month offshore non-deliverable forward contracts were quoted at 47.16, weaker than the onshore spot rate. In the currency futures market, the most traded near-month dollar-rupee contracts on NSE and MCX-SX closed at 47.0825 and 47.0850, respectively, with the total traded volume on the two exchanges at around $7.5 billion.