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Indian rupee snaps 2-day rally as Fed impact fades

MUMBAI: The Indian rupee snapped a two-day rally to weaken slightly as importers including oil firms bought dollars, while the initially big impact from US Federal Reserve Chairman Ben Bernanke’s comments on US stimulus faded later in the session.
Bernanke said the Fed would continue to pursue an accommodative monetary policy as inflation remained low and the unemployment rate might be understating the weakness of the labor market.
Although the rupee hit its highest level in more than a week in the morning session on hopes that foreign investors would curb their recent strong sales in domestic markets, the euro’s fall from a session high, prompted covering of short-dollar positions in domestic markets.
Investors are awaiting industrial output and consumer price inflation data due after market hours for near-term direction.
“Bernanke’s statement seemed in favor of accommodation, but markets will look for more comments, data before being sure of the accommodative policy,” said Samir Lodha, managing director at QuantArt Market Solutions.
The partially convertible rupee closed marginally weaker at 59.6750/6850 per dollar compared to 59.66/67 on Wednesday.
The unit rose to as high as 59.32 in opening trade, its strongest since July 2.
The falls were led by dollar purchases from importers, although traders later spotted greenback sales at around 59.98 levels, largely from state-run banks which helped the rupee stay above the 60-per-dollar mark.
Some traders speculated the selling could be on behalf of the central bank, though that was not the universal view.
In the offshore non-deliverable forward PNDF, the one-month contract was at 60.08 while the three-month was at 60.76.
In the currency futures market INRFUTURES, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 59.88 with a total traded volume of $ 3.41 billion.

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