The Indian rupee dropped on Wednesday as investors around the globe bought dollars in the final days of 2009,with local month-end dollar demand from refiners and importers adding to the pressure. At 10:45 a.m.,the partially convertible rupee was at 46.74/75 per dollar,weaker than its close of 46.66/67 on Tuesday. "In the near term,month-end demand will keep the pressure on rupee and we might possibly test the higher 46.80s. Below 46.70 seems to be a good buying area," said R.K. Gurumurthy,head of treasury,at ING Vysya Bank. Oil is India's biggest import and refiners are the largest buyers of dollars in the local currency market. Demand for dollars tends to peak at the end of each month,when importers are required to make payments for their imports. The dollar held at a two-month high against the yen on Wednesday,keeping the firmer tone it has developed recently on shifting sentiment about the outlook for US rates,while the yen was weaker against higher yielders. Most Asian units were also weaker compared to the dollar. Dealers said they were also watching the sharemarket for clues on capital flows. Indian shares opened flat on Wednesday,but traders ruled out a steep downside as the undertone stayed bullish. "In the New Year - we will have to see how the global indices fair - rupee will largely benefit and we should see rupee remaining stronger in the first two months at least," Gurumurthy said. One-month offshore non-deliverable forward contracts were quoted at 46.76/79,little weaker compared to the onshore spot rate. In the currency futures market,the most traded near-month contracts on the National Stock Exchange and MCX-SX were both quoting at 46.8275 respectively,with the total traded volume on the two exchanges at about $440 million.
