The rupee climbed in the last half hour of trade on Friday, rising from an intraday of one-week low, as banks unwinded long dollar positions on speculation the Reserve Bank of India (RBI) may raise rates soon.
The partially convertible rupee ended at 46.27/28 per dollar, stronger than 46.49/50 at close on Thursday. It had touched 46.60% earlier, its weakest since June 17, according to Reuters data.
The rupee ended 0.2% lower on the week.
?There was a rumour of a rate hike and the market saw 46.50 as a good opportunity to unwind positions on the dollar,? said the chief dealer at a private bank who did not wish to be named.
A third of the total number of economists in a Reuters poll on June 15 had said they expected the central bank to raise rates ahead of its next review on July 27, up from a quarter of the total in a similar poll on June 11.
Traders said a rate hike would help attract more capital inflows into high-yielding assets in Asia?s third-biggest economy. The main share index dropped 0.9%in line with global markets.
Foreign fund flows into and out of the share market have a major influence on the rupee?s fortunes. So far in June, foreigners have bought a net $2-billion worth of shares after pulling out the same amount of equities in May. They are net buyers of $6.6 billion in 2010.
In overseas markets, the euro fell broadly after investors pulled back from riskier assets as share prices fell, but the market was wary of chasing prices aggressively ahead of a Group of 20 leaders? summit.
One-month offshore non-deliverable forward contracts were quoted at 46.47, weaker than the onshore spot rate.
In the currency futures market , the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX ended at 46.3025 and 46.3150, respectively, with the total traded volume on the two exchanges at about $7.7 billion.