MUMBAI: The Indian rupee closed weaker on Friday as sharply rising shares were offset by the dollar's gains versus majors and demand for the U.S.unit from state-run banks, which traders said were likely for payments for defence imports.
The partially convertible unit ended at 48.73/74 per dollar, down from its previous close of 48.68/69. The rupee has been volatile this week, falling to a two-month low of 49.47 on Monday, and rising to a one-week high of 48.47 on Thursday.
The unit rose 0.6 percent on the week, after dropping 2.4 percent last week, its biggest weekly drop in four months.
"The rupee was largely rangebound today. There were two large state-run banks continuously seen buying dollars, probably for some public-sector related payments," said Naveen Raghuvanshi, an associate vice president with Development Credit Bank.
Five dealers said State Bank of India was among the major buyers of the dollars, and they suspected it was likely on account of some defence-related import payment.
Dealers said gains in the US unit also weighed. The dollar and yen were firmer against other major currencies on caution before some key US corporate earnings. The index of the dollar against six majors was up 0.4 percent.
"The sentiment on the rupee however is still bullish in the near-term, and we could see it open around 48.50 levels next week. The Citi results would also be watched for direction on global equities," Raghuvanashi added.
Second quarter earnings results from Citigroup, Bank of America and General Electric are due on Friday, and if they gave a global boost to equities, traders said it would be a positive for the rupee as there would be further flows on funds into Indian stocks.
Indian shares rallied 3.5 percent on Friday, to end the week up 9.2 percent, the best among major markets in Asia, as the government raised hopes for financial reforms.
Foreigners have bought shares worth $1.1 billion so far in July, taking their net purchases in 2009 to $6.2 billion.
One-month offshore non-deliverable forward rupee contracts traded in Singapore were quoting at 48.76/86, close to the onshore spot rate.
In the futures markets, the most traded near-month contract on the National Stock Exchange and MCX-SX was quoting at 48.7550 and 48.7625 respectively, with the total traded volume on the two exchanges at about $1.2 billion.
Source : The Economic Times