MUMBAI: The rupee seesawed in choppy trade on Friday as domestic shares failed to provide a clear direction, while dollar demand from importers and mostly lower Asian units also weighed on sentiment.
At 10:35 am (0505 GMT), the partially convertible rupee was at 46.29/30 per dollar, weaker than its previous close of 46.225/235. On Thursday, the rupee had risen to 45.80, its highest since September 24, 2008.
"Importers have been buying dollars after the rupee rose to 46.10 levels early," a senior dealer with a foreign bank said predicting a range of 46.10-46.40 for the day.
Early in the session, the rupee rose to 46.06 helped by a stronger close in the offshore non-deliverable forwards. One-month offshore NDF's were quoting at 46.24/34, marginally higher than the onshore spot rate.
Dealers said they would watch the share market and the dollar's performance versus majors for further direction.
Indian shares were choppy in early trade on muted cues from Asian peers as traders awaited further cues from corporate quarterly earnings.
The euro and high-yielding currencies such as the Australian and the New Zealand dollars hit new highs for the year against the dollar after positive US data and encouraging corporate earnings prompted investors to further build long positions, dealers said.
Most Asian units were trading weaker against the dollar.
Traders would also be looking out for the central bank's monetary policy review due on October 27.
"Exchange rate management versus inflation management, this is key question that the RBI will need to address. Rising capital inflows are commensurate with sterilisation costs which tend to augment domestic liquidity," Shubhada Rao and Bhavana Mahajan, economists at Yes Bank wrote in a weekly note.
"Given persistent liquidity overhang, the dilemma for monetary policy will lie in managing exchange rate pressures with 'incipient' inflationary pressures which are already building up," they said.
Source : The Economic Times