Rupee off early high as stocks falter

VITAMIN M: The rupee strengthened past 50 per dollar in early trade on Wednesday

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Mumbai: The rupee strengthened past 50 per dollar in early trade on Wednesday on hopes of some foreign inflows into the local share market, but then eased as stocks failed to follow overseas leads.

At 10:15 am, the partially convertible rupee was at 49.98/50.00 per dollar, off an early high of 49.75 but still 0.3 per cent stronger than its previous close of 50.15/16. It had hit a record low of 50.65 during trade on Tuesday.

"The stock market would be the key today," said a senior dealer at a private bank.

"The Reserve Bank of India had aggressively defended the 50.40-50.50 levels in the previous session, so there is likely to be some resistance around those levels now".

Indian shares opened 1.3 per cent higher lifted by gains in global markets, but soon turned negative.

Foreign fund flows have been a key factor determining the rupee's direction in the last two years.

Capital outflows of a net $13.6 billion so far in 2008, have helped drag the rupee down more than 22 per cent against the dollar.

Last year, record inflows of $17.4 billion had helped the local unit rise more than 12 per cent.

One-month offshore non-deliverable forward contracts were quoting at 50.50/65 per dollar, weaker than the onshore spot rate, indicating a bearish near-term outlook.