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Rupee gains; RBI says will bring down inflation

Source : REUTERS
Last Updated: Tue, Aug 05, 2014 17:31 hrs
A street side restaurant owner holds a bundle of Indian currency notes as he sits outside his restaurant in New Delhi

The Indian rupee rose for a second consecutive session on Tuesday, as gains in domestic shares after foreign investors turned buyers following a three-day selling streak helped, and overcoming some volatility earlier in the session.

The Reserve Bank of India kept interest rates unchanged as widely expected and voiced a commitment to bring down inflation, which is also expected to be supportive for the rupee in the longer term.

But in the near-term, analysts say, the currency will likely be impacted by global markets after sudden falls had sent the currency to its worst weekly performance since the record low levels in August last week.

"In the absence of any major domestic events or data in the rest of the week, the market will continue to monitor the global geo-political tensions for cues," said Hari Chandramgethen, head of foreign exchange trading at South Indian Bank.

"The range of 60.65 to 61.40 on the rupee should hold for the week," he added.

The partially convertible rupee closed at 60.8450/8550 per dollar compared to 60.93/94 on Monday. The rupee moved in a wide range of 60.69 to 60.95 during the day. The unit gained 0.4 percent on Monday, its biggest single-day gain since July 11.

Gains in domestic shares helped the rupee after the RBI also lowered minimum bond holding requirements for lenders to spur investment.

Shares were also helped after foreign investors bought Indian shares worth $61.10 million on Monday after selling $494.7 million worth in the previous three sessions.

Corporates and custodian banks were active sellers of dollars, dealers said.

In the offshore non-deliverable forwards, the one-month contract was at 61.21 while the three-month contract was at 61.79.

FACTORS TO WATCH

* Euro dips on weaker service surveys

* Lower U.S. yields support Asia FX, even rupiah

* Strong earnings lift Europe stx; euro falls on PMIs

* Foreign institutional investor flows

* For data on currency futures


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