MUMBAI: The rupee erased early gains to end slightly weaker on Wednesday as a rise in the stock market was overshadowed by importers buying dollars to pay month-end bills and a fall in the euro.
The partially convertible rupee ended at 48.56/57 per dollar, off an early high of 48.3825, and a shade weaker than a close of 48.53/55 on Tuesday, when it had fallen during trade to 48.90, its lowest since May 15.
"There was corporate demand and also short covering by some banks," a senior dealer with a foreign bank, said, adding that refiners were also buying dollars to meet import commitments. The rupee strengthened in early trade, tracking a rise in share prices before the stock market turned choppy. The main stock index eventually closed up 0.7 percent.
Foreign portfolio flows into stocks of about $7.5 billion since mid-March have been a key driver of the local unit, but a fall in shares over the past two weeks has raised concerns about whether the inflows would be sustained. The dollar's gains versus the euro also weighed on sentiment.
"The sudden fall prompted a few banks to cover short dollar positions ahead of the end of session," a trader said. The euro fell on firm demand at the European Central Bank's (ECB) first-ever offer of cheap one-year funds on Wednesday, as global markets waited on the outcome of the Federal Reserve's policy meeting, expected at 1815 GMT.
Source : The Economic Times