Rupee up for 4th straight month; shares help.

MUMBAI: The rupee extended gains in to a third straight day on Friday and recorded its fourth consecutive monthly rise in April as buoyant local shares and broad weakness in the dollar helped market sentiment.

The partially convertible rupee closed at 44.36/37 per dollar, 0.3 percent stronger than 44.5150/5250 at close on Thursday. The rupee has gained 1.2 percent in April mostly helped by the rally in domestic shares. Indian shares rose for the third straight month as it closed 0.3 percent higher on Friday, helped by gains in Asian equities, with financials and outsourcers leading the charge.

Foreign fund inflows into the domestic share market which are a key support for the rupee have reached $6.5 billion so far in 2010, of which 2.1 billion have come in April. Last year, they had bought a record $17.5 billion.

"There is lots of anticipation of the yuan revaluation as it's a long weekend in China, plus in the last few days China has been taking various steps which point towards preparation for a revaluation," said Madhusudan Somani, head of foreign exchange trading at Yes Bank. Dealers said yuan revaluation hopes had prompted banks to cut long dollar positions and helped the rupee along with some dollar inflows from foreign banks towards the 3G auction.

Bids for one set of nationwide third-generation (3G) mobile spectrum licences in India reached 93.30 billion rupees ($2.1 billion), or 166.6 percent above the base price, on the 17th day of an auction, government data showed.

"G7-USD is looking weak, there is some huge selling of USD for month-end fixing related flows. Lots of hopes that the weekend will bring clarity on Greece, all this is leading to lots of short covering in the euro," Yes Bank's Somani said. Investors remained uneasy about the outlook for Greece even as the debt-stricken country took steps to secure an aid package.

Dealers said there was some month-end demand in the market which limited sharper gains in the local unit. Oil is India's biggest import and refiners are the largest buyers of dollars in the local currency market with demand tending to peak at the end of each month when they are required to pay for their imports.

The index of the dollar against six major currencies was down 0.3 percent. The euro rose on Friday, extending gains against the dollar, as expectations Greece will soon receive emergency aid helped to quieten jitters about how Athens will pay its debts.

One-month offshore non-deliverable forward contracts were quoting at 44.43, 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 closed at 44.4750 and 44.48 respectively, with the total traded volume on the two exchanges at about $6.5 billion.

Source : The Economic Times