Rupee ends stronger on Fed comments; oil limits rise
The rupee regained strength to trade 46 paise higher at 59.93 against the dollar at the Interbank Foreign Exchange market on Thursday on increased selling of the US currency by exporters and banks.business Updated: Jun 19, 2014 17:41 IST
The rupee strengthened on Thursday after the US Federal Reserve indicated interest rates are likely to remain lower for some more time, pushing the dollar sharply lower, but high global crude oil prices checked gains in the local currency.
The dollar sank to its weakest level in three weeks on Thursday after a cautious message from the Federal Reserve stopped well short of the aggressive signal of prospective higher interest rates expected by some in the market.
However, rising global crude oil prices and dollar demand from oil marketing companies tempered the rupee's gains.
Brent crude hit a nine-month high near $115 a barrel on Thursday on concerns heavy fighting in Iraq could limit oil supply from OPEC's second-biggest producer.
A Reuters poll showed long positions on the rupee fell to the lowest level since late April, as higher oil prices on intensifying turmoil in Iraq are seen hurting India's economy and further straining government finances.
India imports nearly two-thirds of its oil needs, leaving its currency vulnerable to price swings.
In late trade, forward premiums rose as the central bank was likely paying through state-owned banks, traders said. The one-year forward premiums closed around 494.25 versus 486.75 points on Wednesday.
"If the Iraq crisis is contained, the rupee should strengthen closer to the budget around 59.50 per dollar," said N.S. Venkatesh, treasurer with IDBI Bank.
The new government is likely to present the 2014/15 budget in early or mid-July.
The partially convertible rupee ended at 60.08/09 per dollar versus its previous close of 60.39/40.
Earlier in the day, the rupee had briefly come off highs after Reuters reported India plans to clear some pending oil payments to Iran through the United Arab Emirates central bank, citing three sources with knowledge of the matter.
In the offshore non-deliverable forwards, the one-month contract was at 60.31, while the three-month was at 60.87.