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Rupee breaks 13-day rally; slips to 46.37/$

The rupee closed slightly weaker against the dollar on Wednesday, halting a rally for 13 trading days, amid persistent demand for dollars from state-run banks, dealers said.

Forward premiums fell across on the board on market talk that export refinance limits will be restored to banks by the Reserve Bank of India.

The rupee closed at 46.36/37 per dollar, unchanged from opening levels, but slightly weaker than the previous close of 46.345/35.

The currency has gained nearly 0.7 per cent in January and is currently 1.2 per cent higher than the record low of 46.92 hit in some deals on October 30.

The rupee slipped in early trade on Wednesday to adjust for the swap difference over the long weekend ahead.

Indian banks are closed on Friday due to a national holiday.

Dealers said dollar sales by custodial banks acting on behalf of foreign funds were absorbed by state-run banks, who were bidding for dollars through the day.

Some state-run banks bought dollars on behalf of public sector firms, they said.

Large state-run banks have often intervened on behalf of the central bank in the past to ensure that the rupee did not gain sharply.

Forward premiums fell on heavy receiving (buy-sell swaps) by banks on growing market talk that the central bank will restore limits on export credit refinance, which were cut last July.

The six-month forward premium ended at 4.42 per cent annualised compared to the previous 4.51.

Intra-day report

The rupee slipped in early trade on Wednesday on short covering by some banks ahead of the upcoming holiday weekend, dealers said.

But the outlook remained bullish on steady inflows from foreign funds and investors and lukewarm demand from importers, they said.

The rupee was quoted at 46.36/37 per dollar at 11:20 a.m., unchanged from opening levels, but lower than Tuesday's 46.345/35.

The rupee has gained over 0.7 per cent against the dollar in January due mainly to a surge in foreign investment in Indian stocks and bonds.

The latest data from the stock market regulator showed foreign funds have invested a net $676.9 million in Indian stocks and bonds so far this month after being net sellers in December.

Dealers said the spot rupee was adjusting for the swap difference over the long weekend ahead, and banks which had sold on Tuesday to benefit from this were buying back dollars.

Indian markets are closed on Friday due to a national holiday.

But traders said they expected some dollar sales emerging at these levels and this is likely to keep the rupee ranged between 46.33 to 46.37.

Dealers said the market will also watch moves of state-run banks, which mopped up dollar supplies aggressively on Tuesday, ensuring the rupee did not firm much past 46.34.

Large state-run banks have often intervened on behalf of the central bank in the past to ensure that the rupee did not gain sharply.

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