Rupee bounces off 3-wk low as dollar drops.

MUMBAI: The Indian rupee reversed early losses to end 0.2 percent higher on Thursday as exporters sold dollars to cash in on the rupee's recent weakness, and helped by the euro's slight recovery from 10-month lows versus the dollar.

The partially convertible rupee ended at 45.49/50 per dollar, bouncing back from a low of 45.71, its weakest since March 5. It had ended Tuesday at 45.60/61. Financial markets were shut on Wednesday for a local holiday.

"Exporters got a good level in the morning to cover. In the afternoon, the stock market also turned positive, and with gains in the euro and sterling, selling pressure on the dollar increased," said Farhad Doctor, foreign exchange dealer at IDBI Bank.

The index of the dollar against six major currencies was down 0.2 percent. Indian shares also bounced back from morning lows and closed 0.6 percent higher on Thursday, helped by a rise in European equities.

Foreign fund flows into the stock market are a crucial determinant of the rupee's fortunes. Foreigners have so far in 2010 bought shares worth a net $3.5 billion, adding to record inflows of $17.5 billion seen in 2009.

Traders said at the 45.5 level, dollar selling interest was expected to emerge again, especially from exporters. One-month offshore non-deliverable forward contracts were quoted at 45.60, 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 both closed at 45.5250, with the total traded volume on the two exchanges at a high $6.8 billion.

Source : The Economic Times