RUPEE: Down On Plunging Local Shares; Rising Oil Prices

capital market | Mumbai |

RUPEE: Down On Plunging Local Shares; Rising Oil Prices

The Indian rupee commenced lower on Thursday, February 24, 2011 despite an early extended rise in the European unit overseas that had aided the domestic currency to gain in yesterday's late trades. The domestic currency however shrugged off climb in the euro since early today and extended losses further so far during the day as worries over Libyan unrest pressurized sell off in the domestic share market. Meanwhile, soaring oil prices also seemingly weighed down the local unit on month end dollar demand from oil companies to make their payments. Rupee opened lower by 10 paise at Rs 45.23 per dollar and fell from thereon to register an intra day low at 45.34. In the spot currency market, rupee was last seen trading at 45.33 at 10.25 AM IST, lower by 20 paise or 0.44% as compared to previous close at 45.13.

Rupee's rise in the previous session can be attributed to gains in the European unit that offset any concerns in the Middle East on anticipation that the ECB would hike interest rates soon to tame rising inflation in the region. The US dollar further dropped versus the euro and pound today on expectations that the European Central Bank and the Bank of England would lift interest rates before the Federal Reserve. The greenback this time around is not seen registering a consistent rise backed by safe haven demand on the rising to turmoil in the Middle East. Euro ended yesterday at almost 1.3742 and edged higher in early Asian trades to be currently quoting at 1.3775 against the US dollar.

The US dollar index, which tracks the greenback against a trade-weighted basket of six major currencies, fell 0.27% at 77.20. Among Asian currencies, the Taiwan dollar was down 0.35% at 29.67, the Indonesian Rupiah 0.08% to 8862.50 and the South Korean won by 0.23% at 1126.60 as against the US dollar.

The domestic indices edged lower in opening trade, dragging down the local unit on macroeconomic worries as crude oil surged on concerns about oil supply amid ongoing unrest in the Middle East and North Africa. Asian markets were also mixed trailing a decline in the United States markets pressured by a surge in oil prices on fears political turmoil in Libya could spread to other oil exporters in the region, and declines in global markets. Trading in US index futures indicated that the Dow could gain 31 points at the opening bell on Thursday.

As per provisional figures, foreign funds sold Indian shares worth Rs 554.60 crore and domestic funds bought shares worth Rs 352.82 crore on Wednesday. At the time of writing, the key benchmark BSE Sensex was lower by around 130 points at 18048.80 while S&P CNX Nifty was also down by 41 points at 5396.40.

In the domestic currency futures market on the NSE, the forward month February USD/INR contract, due for expiry today opened at 45.21. The contract hit an intra day high at 45.34 and registered a low at around 45.21 so far during the day. Meanwhile, euro- rupee contract rose 0.75% at 62.45 from 61.98 in the previous session. The JPY/INR contract is up 1.14% at 55.14 from 54.52 yesterday while GBP/INR contract is higher 0.48% at 73.65, as against 73.30 registered at close on Wednesday. At the time of writing, the NSE as well as MCX February 2011 USD/INR contract was at 45.31, down 15 paise or 0.32% compared to the previous close at 45.17.

RBI Reference Rate

















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