Mumbai: The rupee snapped a five-day losing streak to strengthen on Wednesday as a sharp rise in local shares in line with global equities raised expectations of more capital inflows into the domestic stock market.
The partially convertible rupee ended at 47.29/30 per dollar, off an intraday peak of 47.25 and about 0.9% stronger than 47.71/72 at close on Tuesday when it had dropped during trade to 47.75, its weakest since early October.
The market is closed on Thursday for a local holiday.
The BSE benchmark Sensex ended 2.3% stronger, rising the most in two weeks, supported by a rally in global stocks.
Foreign investors are net sellers of about $2.3 billion in local shares, but remain buyers of stocks worth $4.3 billion so far this year. Traders expect a robust pick up in economic growth, which is likely to attract more inflows in the months ahead.
India’s economy probably grew 8.7% in the March quarter from a year earlier, its strongest since December 2007, a Reuters survey showed on Wednesday.
Asia’s third-biggest economy likely grew 7.2% in the financial year ended 31 March, up from 6.7% in 2008-09, the poll showed. The data is due on Monday.
Traders remain uncertain about the rupee’s movement due to the euro zone debt woes.
“The markets remain choppy and hazy. Investors still do not have full confidence in the markets, so it is a wait and watch game for some more time,” said Paresh Nayar, head of foreign exchange and money markets at First Rand Bank.
“The rupee will also be impacted due to this volatility in world markets.” he said.
A senior trader at another foreign bank said he expected the rupee to trade in a range of 47.25 to 47.50 to the dollar, when the market opens on Friday.
The euro slipped on Wednesday but was off near four-year lows hit against the dollar the previous day as equities rebounded, although sentiment remained shaky for the single currency.
One-month offshore non-deliverable forward contracts were at 47.26, near the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX ended at 44.4425 and 44.4325 respectively, with the total traded volume on the two exchanges at about $6.8 billion.