Rupee snaps four-day losing streak as S&P raises rating outlook

By Swati Bhat

MUMBAI (Reuters) - The rupee rebounded sharply from a one-and-a-half month low hit early on Friday after Standard and Poor's raised the country's sovereign rating outlook, with the recovery in local shares also aiding.

Standard and Poor's raised the outlook for India's "BBB-minus" rating back to "stable" from "negative," saying Prime Minister Narendra Modi government's "strong" mandate would allow it to implement fiscal and economic reforms.

The BSE Sensex and Nifty snapped a three-day losing streak on Friday as rate-sensitive stocks such as IDFC Ltd (IDFC.NS) jumped after the rating outlook upgrade.

"We don't have to see much immediate impact on markets following the S&P outlook upgrade but it is big news from a long-term investment perspective," said Paresh Nayar, head of currencies and fixed income at First Rand Bank.

Traders broadly expect the rupee to hold in a 60.80 to 61.80 to a dollar range next week.

The partially convertible rupee ended at 61.14/15 per dollar compared with Thursday's close of 61.34/35. The rupee fell to 61.62 earlier, its lowest since Aug. 8.

The rupee rose 0.3 percent on the day, snapping a four-day fall and posting its biggest single-day gain since Sept. 12. On the week, however, the rupee fell 0.5 percent, its third straight weekly fall.

Traders will continue to monitor foreign fund flows for direction with sentiment also cautious ahead of the Reserve Bank of India monetary policy meeting on Sept. 30.

The central bank is expected to keep interest rates on hold until the April-June quarter of next year, when it may loosen policy, a Reuters poll showed on Wednesday.

Foreign funds have bought $14.1 billion in equities and $20 billion in debt so far this year.

Dollar demand from oil and other importers to meet month-end import commitments pressured the rupee earlier in the day along with the broad dollar strength, dealers said.

The dollar was back on the front foot against the yen and several other major currencies on Friday, on track for an 11th straight weekly gain that extends its longest winning streak since its 1971 free float.

In the offshore non-deliverable forwards, the one-month contract was at 61.52, while the three-month was at 62.10.

(Editing by Prateek Chatterjee)