Rupee inches lower on Asian cues; shares key

The rupee edged lower in early deals on Tuesday on the back of weaker regional peers and tracking a subdued start to the domestic sharemarket.

At 9:20 am (0350 GMT), the partially convertible rupee was at 45.5556 per dollar, marginally weaker than 45.5354 at close on Monday when it hit 45.38 during trade, its strongest since Jan. 12.                                           

J Moses Harding, head of global markets, at IndusInd Bank, said there was resistance at 45.38-43 and the rupee should move back to 45.65-75.

"The lack of momentum in EURUSD and globaldomestic stock markets to sustain their recent gains would guide this move," he said. "Crude oil trading above $80 is a threat and the 'strong-wall' of Reserve Bank of India will keep the rupee bulls nervous."       

The central bank usually sells or buys dollars via state-run banks to avoid excessive volatility in the currency market. Oil slid on Tuesday as forecasts for growing US crude inventories tempered bullish sentiment about the global economic recovery, which had driven prices to an eight-week high above $82 a day earlier. 

Oil is India's biggest import and refiners are the largest buyers of dollars in the domestic currency market. Most Asian units were weaker compared to the dollar. The index of the dollar against six major currencies was slightly higher.

The euro eased on Tuesday, while higher-yielding currencies slipped against the dollar and the yen as demand for riskier assets took a breather.                                           

Dealers said they would watch shares for direction on capital flows. Foreign fund flows into and out of the stock market are a key driver for the rupee.

Since mid-February, foreigners have bought shares worth $1.7 billion. Last year record buying of $17.5 billion had helped the rupee gain 4.7 percent on year.                                          

Indian shares were trading down 0.1 percent taking cues from weak Asian peers and on caution after rising more than 5 percent in about 10 days. The rupee gained 1.1 percent last week, its best since a 1.9-percent rise in the week to Jan. 8.            

One-month offshore non-deliverable forward contracts were quoted at 45.4959. In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were both at 45.5950, with the total traded volume on the two exchanges at about $300 million.