Rupee flat on exporter dollar sales but Gold rises after Fed rate cut

MUMBAI: The rupee ended almost flat on Thursday, largely ignoring a hefty U.S. rate cut, as exporters sold dollars while outflows relating to a recent share offering largely checked gains. The partially convertible rupee ended at 39.38/39 per dollar, a shade stronger than Wednesday's close of 39.39/40. It has hovered in a broad 39.34-39.48 band for most of the week. It hit a decade high of 39.16 per dollar in November. The redemption payments were more than offset by exporter selling and the rupee seems to be caught in a broad 39.30-39.50 band for the near term, said Sudarshan Bhat, chief currency dealer at Corporation Bank. About $1 billion to $1.5 billion is expected to have left the banking system, out of an estimated $5 billion, towards payments for Reliance Power's IPO, dealers said. Some export rollovers also took place and there was the usual month-end demand for dollars, he said. Oil refiners typically step up their dollar buying at the end of each month to meet import commitments. India imports a majority of its oil needs. The U.S. Federal Reserve cut rates by a hefty half-percentage point on Wednesday as part of an ongoing effort to halt a sharp slowdown in the world's largest economy, a move which could attract investment flows into India. Capital inflows into the stock markets were a driver for the rupee's more than 12 percent rise in 2007. But increasing risk aversion among global investors has meant that foreigners haven't been so keen to invest in recent sessions. They have sold nearly $3 billion worth of stocks in the last 11 sessions after buying a record $17.4 billion in 2007. Increased risk aversion has also caused some companies to cut their IPO prices to attract investor interest. Deutsche Bank expects the rupee to drift lower from the second quarter of 2008. Gold rises after Fed rate cut but off record high Gold firmed on Thursday after the US Federal Reserve slashed interest rates by half a percentage point, but a drop in crude oil prices limited gains, preventing the metal from breaking recent record highs. Spot gold rose to $923.80/924.70 an ounce from $921.10/921.80 ounce late in New York on Wednesday, when it rallied to $932.00 -- just below Tuesday's all-time high of $933.10. Also Read à Gold may exceed $1,000 this year: Morgan Stanley à Multi currency converter à India expects to add $100 bn to forex reserve in FY'08 à Investor appetite lifts Dubai '07 gold imports à India's jewellers burned by record gold prices à Record breaking gold could hit $1000: Analysts à NCDEX eyes 25% market share in gold futures trade The market remained volatile after this week's rally, with dealers also noting selling by Japanese speculators and other holders, which dragged down the price to as low as $920.50. The market will keep up the good sentiment to try the next record high, said Louis Lok, a dealer at Bank of China in Hong Kong. But charts indicated that gold may have trouble sustaining the uptrend, said Lok. I would expect the market to try around $930 but if it can't break a new record high, we may a see correction again before Friday. Gold's 14-day relative strength indicator (RSI) was at 73.805 on Wednesday, up from 60.895 on Jan. 22, when the metal dropped to its lowest in nearly three weeks. The market views an RSI of 30 or less as oversold and 70 or more as overbought. Crude oil futures fell more than a dollar on fears more losses in the U.S.financial sector will continue to weaken the economy of theworld's largest oil consumer. Just for today, I am looking at $935, said William Kwan, a dealer at Phillip Futures in Singapore, referring to the upside. But based on technical point of view, I am looking at a downside possibility to as low as $905 for spot gold, he said. COMEX's April gold futures firmed but were off Wednesday's record high of $942.20 an ounce. The Fed cut U.S. interest rates by a half-percentage point on Wednesday as part of an aggressive effort to halt a sharp slowdown in an economy hit by a housing slump and a credit crunch. The move comes just eight days after the U.S. central bank unexpectedly cut its lending rate by three quarters of a point to boost the economy. A U.S. rate cut tends to weaken the dollar and boost gold's appeal as an an alternative investment. The dollar inched up to 106.40 while the euro eased to $1.4831 While investors were expected investors to buy gold on dips, dealers said a lack of interest from the jewellery sector in main consumer India during the normally busy wedding season could eventually dampen sentiment. I do find find the physical sector is not too willing to buy gold at this price here, said Kwan of Phillip Futures. The price is a bit on the high side, that's why they do feel the pinch, he said. Investors across Asia are cashing in on gold's rally to a record peak around $930 an ounce, but jewellery makers are struggling to attract consumers, who are turned off by the high prices. The benchmark gold futures contract on the Tokyo Commodity Exchange ended 13 yen per gram higher at 3,195 yen. Platinum firmed to $1,686.50/1,691.50 an ounce from $1,684/1,688 an ounce late in New York. Silver fell to $16.74/16.79 an ounce from $16.82/16.87 in New York. Palladium dropped to $384.50/387.50 an ounce from $386.00/389 an ounce.

Rupee flat on exporter dollar sales but Gold rises after Fed rate cut

The rupee ended almost flat on Thursday, largely ignoring a hefty U.S. rate cut, as exporters sold dollars while outflows relating to a recent share offering largely checked gains.

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