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Rupee ends steady at 46.85/$

The rupee ended steady on Wednesday after trading in a narrow range amid heavy dollar sales by exporters, with sentiment boosted by the stock market's technology shares-led recovery.

Dealers said a large petrochemicals firm was among several exporters which hedged future receipts, dragging dollar forwards too down during the day. A state-run firm bought dollars to make a payment in euros, they said.

The rupee ended at 46.8450/8525 per dollar, little changed from its previous close of 46.83/85.

It traded in a 46.81-46.87 range on Wednesday.

The Reserve Bank of India's annual Monetary Policy on Thursday also kept traders wary of fresh positions and kept movements ranged, dealers said.

Expectations of a cut in interest rates on export finance and a restoration of bank refinance limits for export credit, which were halved last July, weighed on forwards, they said.

The six-month forward premium ended down at an annualised 4.69 per cent compared with Tuesday's 4.77 per cent.

The rupee hit a lifetime low of 47.10 on Tuesday, falling over 1 per cent in a week, amid concerns the plunging share market will impact foreign investment and on a need for it to correct an overvaluation against its trade-weighted real effective exchange rate.

It recovered after a central bank official said on Tuesday the market may not have factored recent falls in India's inflation levels while computing the REER, which triggered heavy export sales.

Intra-day report

The rupee gained in early trade on Wednesday on continued dollar sales by foreign banks and dealers said RBI's statements about the currency's valuation on a trade weighted basis also helped.

At 9:10 (IST) the rupee was quoted at 46.81/83 per dollar, up from its opening of 46.86/88. It closed Tuesday at 46.83/85, off a record intraday low of 47.10.

An RBI aide said on Tuesday that the market may have ignored recent falls in the country's inflation rate while calculating the rupee's real effective exchange rate.

India's year-on-year inflation rate, measured by the wholesale price index, fell to 4.87 per cent in the week ended March 31 from 6.5 per cent in the week ended March 17.

Traders said these statements had forced banks to unwind long dollar positions on Tuesday and were currently cautious about purchasing dollars.

Dealers said they expected the currency to trade in a range on Wednesday amid customary dollar sales by banks to benefit from weekend swaps differentials.

Banks usually sell dollars on Wednesday and buy them back before the weekend to gain from high differentials.

Dealers said dollar bids in early trade were thin while supplies from foreign banks helped the rupee to firm. These banks, which usually act on behalf of foreign funds, had sold dollars through Tuesday.

Data from the stock market regulator showed that on Monday, foreign funds had invested a net of $21.3 million in Indian stocks in addition to $40.4 million on last Thursday.

Foreign portfolio investors have thus invested a net $181 million in April to date, taking their investments in 2001 to $1.90 billion.

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