Rupee gains, refiners to get dollars from RBI

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Fri, Jun 6 11:59 AM

MUMBAI (Reuters) - The Indian rupee nudged higher on Friday on hopes the Reserve Bank of India would soon start providing foreign exchange to oil companies, easing demand for dollars from refiners.

At 10:05 a.m., the partially convertible rupee was at 42.76/77 per dollar, off an early high of 42.7275 but 0.3 percent stronger than its Thursday's close of 42.90/91. It is, however, down more than 8 percent so far in 2008.

"The RBI again said yesterday that they will provide foreign exchange to refiners and that has helped the sentiment on the rupee," said Indrajit Sen Gupta, chief dealer, foreign exchange at Canara Bank.

Traders said the market was also underpinned by expectations for an interest rate increase to rein in soaring prices, after the central bank said it would use all instruments to contain inflation.

Higher interest rates could draw in dollars and help the rupee rise.

Annual inflation in late May is expected to come in at 8.3 percent, its highest in more than 3-½ years, due to higher oil and food prices, a Reuters poll forecast on Thursday. The data is due at noon.

Traders also watched the stock market, where foreign funds have been active sellers this year. The main stock index rose as much as 1.3 percent early, but lost steam and flipped between positive and negative territory.

Foreign funds have pulled out $4.5 billion from Indian shares this year, pushing the market down more than a fifth. In 2007, the funds had bought a record $17.4 billion and helped stocks rise 47 percent and the rupee gain than 12.3 percent.