Rupee climbs as oil falls, stocks rally

Enlarge Photo File photo of a girl displaying a 1000 rupee note. REUTERS/Savita Kirloskar

Wed, Jul 9 10:57 AM

MUMBAI (Reuters) - The rupee strengthened on Wednesday after oil prices fell sharply, easing concerns about inflation and global credit crisis worsening further. A stocks rally also underpinned the market.

At 10:48 a.m. the partially convertible rupee was at 43.1625/1700 per dollar, 0.2 percent stronger than Tuesday's close of 43.26/27. It had hit a 15-month low of 43.50 per dollar last week.

"The oil prices are down, so offshore arbitrage related dollar demand is not there, and even equity is picking up," said L. Subramanian, head of treasury at ICICI Bank.

"There is some improvement on the political front as well and so the sentiment has slightly changed," he added.

The rupee is likely to trade in a band of 43.08 to 43.15 through the rest of the session, with a strengthening bias traders said.

Oil, India's biggest import, was steady above $136 a barrel after having fallen more than $5 on Tuesday, pushing losses so far this week to about $10.

India's main share index rallied more than 3.5 percent in early trade, helped by lower global oil prices and hopes the government would revive stalled economic reforms after the communist allies quit the coalition.

The Samajwadi Party (SP), whose support appears crucial for the survival of the government, said on Tuesday it would not be "rigid" on economic issues but wants a mechanism through which it can influence policy making.

The SP also said it wanted the ruling coalition to use the country's foreign exchange reserves to check the depreciation of the rupee and inflation.

The communist parties that have provided the government with a parliamentary majority for four years said on Tuesday they were withdrawing their support to protest a civilian nuclear energy deal with the United States

Dealers said they would be watching political developments and await the government to seek a vote of confidence in parliament.

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