Mumbai: The rupee strengthened on Wednesday as the three-month rally in local shares extended gains to more than 90% and bolstered expectations of more capital inflows into Asia’s third-biggest economy.
The partially convertible rupee ended at Rs47.24/25 per dollar, about 0.5% stronger than a close of Rs47.48/49 at close on Tuesday, when it had fallen to Rs47.80 during trade, its weakest since 28 May. “Stocks have contributed to the rupee’s rise. But it’s also the dollar’s fall aiding the rupee,” a senior trader with a foreign bank, said.
India’s main share index rose 2.25% on Wednesday to its best close in 10 months on Wednesday, as markets across Asia and Europe were boosted by cash-flush investors buoyed by signs of revival in global economic revival.
Foreign portfolio inflows of more than $6.5 billion since mid-March have helped the rupee climb about 10.5% from its record low of Rs52.2 in early March. Last year, record outflows of more than $13 billion had pushed the rupee down by about a fifth.
Traders expect the government to announce reform steps in budget next month to bolster a slowing economy, and that could add to foreign investor interest.
The dollar fell against higher-yielding currencies on Wednesday as the optimism about economic improvement gave investors the confidence to take on more risk.
One-month offshore non-deliverable forward contracts were at 47.32/42, slightly weaker than the onshore spot rate.