Mumbai: The rupee strengthened for the third day on speculation the Federal Reserve’s pledge to add liquidity to credit markets will attract overseas funds to Indian shares.
The currency climbed to a one-week high after the Fed said on Tuesday it will inject up to $200 billion (Rs8.1 trillion) to avert a wider credit crunch and counter a housing slump that is threatening to drag the world’s biggest economy into a recession. The benchmark sensitive index, or Sensex, rose as much as 3.5% before ending little changed.
“The rupee should continue its rising trend,” said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. “The assurance of liquidity will make dollars more easily available.”
The currency advanced 0.3% to 40.32 a dollar in Mumbai, according to data compiled by Bloomberg. It may touch 40.10 this week, Bhatt said. The local currency pared gains on speculation companies including Indian Oil Corp., the country’s largest refiner, will need to purchase more dollars to pay for crude oil after prices rose to a record.
“Oil prices are going to keep the rupee under a fair amount of pressure in the near term,” said V. Rajagopal, chief currency trader at Kotak Mahindra Bank in Mumbai. “I expect more demand for dollars in coming days.”
The rupee, the second-worst performer in Asia this year after the South Korean won, may decline to 40.65 this week, Rajagopal said.