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Rupee at 1-week high as risk appetite returns

business Updated: Jun 11, 2010 10:57 IST

Reuters
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The rupee rose to its highest level in a week on Friday as risk appetite returned to markets globally after lower-than-expected US jobless claims and comments from the European Central Bank president.

At 10 am (0430 GMT), the partially convertible rupee was at 46.75/76 per dollar, after hitting 46.68, its highest since June 4 and above its Thursday's close of 46.96/97.

The European Central Bank (ECB) promised extra cash on Thursday to keep euro zone liquidity flush until the end of the year but kept a resolute silence on details of its controversial government bond buying programme.

"There is bullishness all around the globe post comments from ECB and the US data, so rupee is also rallying," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.

The number of US workers filing claims for jobless aid fell modestly last week as the labour market recovery struggled for momentum, while a slip in exports in April supported views of moderate economic growth.

The euro rose to a session high against the dollar above $1.21 after ECB President Jean-Claude Trichet said the bond programme should not be viewed as a change to the monetary stance, which economists see remaining unchanged until the second quarter of 2011.

The euro was trading around $1.21 on Friday as its short-covering rally paused, with the single currency squaring up to test significant bands of resistance.

"Trichet's comments have helped bring risk appetite back into markets," a senior dealer with a foreign bank said, adding India's April industrial output was likely to beat estimates and expand 14.3 per cent.

The data, due around 11 am (0530 GMT), was forecast to have grown 13.5 per cent, the same pace as in March, the median in a Reuters poll of 21 economists had showed.

The main share index rose 1 per cent in early trade, with Reliance Industries and ICICI Bank leading the rise, taking cues from strong world markets.

Foreign fund flows into and out of the share market are closely monitored as they have a large impact on the rupee's fortunes. Foreigners have bought a net $83.6 million so far in June, after pulling out $2 billion in May.

"The rupee should trade in a range of 46.60-46.85 today," a senior dealer with a large state-run bank said.

One-month offshore non-deliverable forward contracts were quoted at 46.90, weaker than the onshore spot rate.

In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were both at 46.8525, with the total traded volume on the two exchanges at about $900 million.