Mumbai: The rupee strengthened on Thursday, snapping a six-session slide as it got a boost from some broad weakness in the dollar, but a 3% drop in the local stock market and higher global oil prices contained gains.
The partially convertible rupee ended at 43.51/52 per dollar, 0.4% stronger than Wednesday’s close of 43.70/72. It had hit a 17-month low of 43.87 on Wednesday.
“The rupee appreciated mainly because the dollar is weakening against other major currencies. There was an absolute lack of demand for dollars at higher levels which helped the rupee,” a senior dealer with a foreign bank said.
The dollar was weighed down by persistent concerns over the US financial system that also triggered a broad unwind of so-called “carry trades”, pushing the Japanese yen sharply up across the board. Dealers said the sharp fall in local shares, which were led down by banks on worries about rising inflation and the risk of the Reserve Bank of India tightening policy, curbed gains.
Foreign funds have sold a net $7.2 billion worth of Indian shares so far in 2008 after buying a record net $17.4 billion last year, weakening a key support for the rupee and helping push it down more than 9% this year.
Meanwhile, inflation accelerated to 12.63% in the week to 9 August. This could see the rupee weaken at Friday’s open, dealers said.