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Rupee up on robust dollar inflows, Greek soother

Source : REUTERS
Last Updated: Mon, Feb 13, 2012 12:36 hrs
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The rupee rose on Monday powered by robust dollar inflows on improved risk appetite after Greece moved a step closer to securing much-needed bailout funds to avoid a messy default.

However, dollar buying by local oil refiners and possibly some gold importers capped the rupee's rise, traders said.

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Domestic oil companies are the largest buyers of the dollar in the local currency market as oil is India's biggest import item. Asia's third-largest economy is also the world's top consumer of gold.

The rupee ended at 49.19/20 to the dollar, stronger than Friday's close of 49.40/41. It moved in a band of 49.1250 to 49.5400 during the session.

"Strength is coming back into the rupee," said Naveen Raghuvanshi, associate vice-president of forex trading at Development Credit Bank.

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"Buying of risk (risky assets) is also improving as it looks like the problems in Europe might be coming under control. So we could see the rupee hit 49 in coming sessions with resistance around 48.80-48.75."

The rupee has gained more than 7.5 percent so far in 2012, mainly on foreign fund inflows worth more than $7 billion until February 10, data from Securities and Exchange Board of India showed.

Steps taken by the Reserve Bank of India in the past few months to weed out speculation in the local currency market as well as to boost dollar inflows have aided the rupee.

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But traders fear that the fundamental weak links in the Indian economy such as high inflation and yawning twin deficits could cut short the currency's recovery.

The local currency had plunged nearly 16 percent last year to hit a record low of 54.30 and was the worst performing Asian unit against the dollar.

Relief over the passing of austerity measures by the Greek parliament saw bank shares lead European stocks higher on Monday, while the euro also gained.

Monthly inflation data due around noon (0630 GMT) on Tuesday is watched for clues on growth and interest rates, traders said.

Headline inflation probably eased to 6.60 percent from a year earlier in January, from 7.47 percent in December, helped by easing food prices, a Reuters poll showed.

One-month offshore non-deliverable forward contracts were at 49.5.

In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all ended around 49.38, on total volume of $5.14 billion.


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