By Archana Narayanan
MUMBAI (Reuters) - The rupee recouped intraday losses to close marginally higher on Thursday, as the euro firmed on upbeat German data.
Dollar inflows also supported the Indian currency, although traders said this was balanced by dollar demand from oil importers through much of the day.
The rupee rose near the close after the euro, considered a proxy for risk appetite, rose to a 10-week high against the dollar on a report showing that German business sentiment rose for a fourth month in a row.
The rupee closed at 49.19/20 to the dollar, up slightly from Wednesday's close of 49.22/23. It touched a low of 49.32 in early trading.
"The rupee recovered smartly, tailing the euro," said Sachin Joshi, a forex dealer at IndusInd Bank.
Oil refiners, the biggest buyers of dollars in the local currency market, have scaled up their purchases over the past few days to clear outstanding import payments to Iran as quickly as possible as Western sanctions tighten.
India, which imports about 80 percent of its oil requirements, imports about 12 percent of its oil needs from Iran.
Traders said the outlook for the rupee was bullish, with foreign inflows expected to pick up as the economy responds to the Reserve Bank of India's more accommodative monetary policy.
Foreign funds have poured more than $8.6 billion into Indian equities and debt so far in 2012, helping the rupee rise by around 8 percent after the 16 percent drop in 2011.
Any Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore, said the rupee appears to have lost momentum after recovering in January.
"The rupee looks to consolidate within the current trading range," he said.
Indian shares fell for a second consecutive day as investors took profits on expiry of monthly derivatives, and concerns grew about rising oil prices.
One-month offshore non-deliverable forward contracts were at 49.18.
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 were all around 49.23, on a total volume of $3.1 billion.
(Reporting by Archana Narayanan; Editing by Ted Kerr)
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