Rupee pares losses after hitting 3-wk low on IIP data

After falling to three-week low of 54.07 on sluggish industrial output and rising inflation, the rupee on Tuesday wiped out losses to end stable at 53.85, snapping a four-day losing trend, on late dollar sales and FII inflows.

On Interbank Foreign Exchange (Forex) market, the rupee commenced lower at 53.95 a dollar from the previous close of 53.85. It dropped to a three-week intra-day low of 54.07 on continued dollar demand from importers and initial hesitancy in local stock markets.

Dollar demand surged after government data showed growth in industrial output contracted by 0.6% in December and retail inflation, on other hand, remained in double digits at 10.79% in January.

However, late dollar selling by exporters and rise in stocks helped the rupee to bounce back to a high of 53.84, before ending at its overnight closing level of 53.85.

In last four trading sessions, the rupee had dipped by 71 paise or 1.34% against the US dollar. "The rupee witnessed a pressure after the disappointing IIP numbers. However it saw late appreciation taking cues from recovery in domestic stocks, the gains in the euro and weak dollar index," said Abhishek Goenka, the founder and CEO, India Forex Advisors.

According to provisional BSE data, FIIs bought Indian stocks worth R600 crore on Tuesday. Globally, the dollar index was down by 0.21% against a basket of six major currencies, which also aided the rupee to end stable.

Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "The rupee reversed most of its intra-day losses in the second half of session after the dollar index edged lower from its intra-day high of over 80.50 levels to 80.20 levels after the G7 nations pledged to keep fair exchange rate and not indulge in lowering of home currencies."

The premium for the forward dollar ended steady to better on stray payments from banks and corporates. The benchmark six-month forward dollar premium payable in July closed at 181-1/2-183-1/2 paise from Monday's close of 181-1/2-183 paise.

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