Rupee gains against U.S. dollar as stocks rally, eyes on RBI decision

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The Indian rupee, on Friday, appreciated against the U.S. dollar for a second successive session as domestic shares rallied after the European Central Bank (ECB) signaled to protect the euro zone from crisis. The comments from ECB and hopes for more monetary easing by the Federal Reserve spurred dollar selling from companies and interbank traders, resulting in gains in the domestic currency against the U.S. dollars. However, the local currency experienced some pressure after Germany's Bundesbank restated its doubts about buying bonds of troubled euro zone nations.

In futures trading, USDINR for August 2012 contract appreciated as much as 30.75 paise to 55.52 per dollar, and settled at 55.5775, up by 0.45 per cent, on MCX-SX. While, rupee spot appreciated as much as 21.8 paise to 55.30 per dollar, and settled at 55.33, up by 0.34 per cent.

Rupee witnessed a volatile trade during the week and ended almost on a flat note on the weekly basis, down by 0.02 per cent. A mix sentiment for the rupee from both the global and domestic front kept the rupee in a tight range of 56.40-55.30 last week. However, the near term outlook for the domestic currency is still weak as Prime Minister Manmohan Singh is likely to hold off on fuel subsidy and retail reforms because of renewed opposition from party colleagues and coalition allies.

In an another move, month end dollar demand from oil importers could also put pressure on the rupee this week, while forex dealers are also looking forward to the Reserve Bank of India's policy review on July 31, 2012 (Tuesday). Speculators are expecting that the RBI will keep its repo rate unchanged at 8 per cent at its quarterly review.

Story first published: Monday, July 30, 2012, 9:30 [IST]
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