Volumes were thin as most global markets were shut for new year holidays. Emerging from a year, which saw the rupee plumbing to a series of lows, traders are awaiting allocations from foreign investors into local markets, which form a key support for the currency.
Foreign investors have been buyers of over $20 billion in stocks in 2013 as local benchmark indexes hit record highs. The debt markets saw outflows of $8 billion, primarily since mid-May, but have turned positive in December.
Both wholesale and retail inflation data due by mid-January will be closely watched ahead of the central banks monetary policy review on Jan. 28. Any rate hike to tamp down inflation will have a negative impact on stocks and will hurt inflows.
The rupee is likely to consolidate at the current levels keeping an eye on the data in US and political developments in India, said Vikas Babu Chittiprolu, a senior currency dealer at Andhra Bank.
Fresh fund allocations by the FIIs and continued importers demand will keep it range bound, he said.
The partially convertible rupee closed at 61.90/91 per dollar compared with 61.80/81 on Tuesday, in a range bound trading session. It ended 2013 down 11%, a third successive annual loss. Analysts say elections will be another key theme in 2014, with a stable government likely to usher in the prospect of more reforms and support the rupee. In the offshore non-deliverable forwards, the
one-month contract was at 62.21, while the three-month was at 63.07.