By Swati Bhat
MUMBAI (Reuters) - The rupee strengthened to a five-week high on Thursday as the RBI's measures to drain liquidity started to show impact, although demand for the greenback from importers towards late trade meant the unit closed just marginally stronger.
The rupee has now gained for a second session following the Reserve Bank of India's additional cash draining measures on Tuesday, after its initial steps on July 15 to defend the rupee had failed to have much of an impact.
The RBI also paid high yields in its 52 billion rupees sale of cash management bills on Thursday, which followed a 120 billion rupees sale of treasury bills on Wednesday, showing the central bank's commitment to drain cash.
"The measures are finally starting to have some impact but how long and at what levels will the rupee stabilise is the question. We need to see where INR heads in the coming week," said Paresh Nayar, head of fixed income and foreign exchange trading at First Rand Bank.
"I won't be surprised if various support levels right from 58.80 down towards 58.20 are taken out. There could be some more announcements in store, which could be supportive of rupee, possibly a USD bond sale, in what shape I don't know," he added.
The partially convertible rupee closed at 59.11/12 per dollar compared with 59.13/14 on Wednesday. The unit rose as high as 58.76, its strongest since June 19.
Traders said good receiving was seen in the onshore forwards with the one-year rate, which climbed to a 15-year high of 519.25 points, falling sharply to 480 points.
The rupee was also lifted by good dollar sales from corporates, particularly Essar Oil
Foreign banks were also spotted selling dollars, dealers said.
However, demand from importers, particularly oil refiners, to meet month-end import commitments pulled the rupee off highs.
In the offshore non-deliverable forwards, the one-month contract was at 59.56 while the three-month was at 60.40.
In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed around 59.10 with a total traded volume of $3.2 billion. (Editing by Jijo Jacob)
