Mumbai: The rupee reversed early losses and rose to its strongest in eight weeks on Wednesday as another surge in domestic shares calmed worries of foreign investors resuming sales of their stock holdings.
The partially convertible rupee closed at Rs49.70/71 per dollar, off a high of Rs49.60, which was its strongest since 18 February but still 0.4% above its previous close of Rs49.88/90.
In early trade, the rupee fell to Rs50.09 as the stock market fell as much as 2.3%, but then rode the share market’s turnaround a day ahead of the start of a month-long voting process for national elections.
“The dollar-rupee looks soft. If we get three to four days of good news, then the rupee can go up to 49 or even 48.50. After that election jitters will take over,” said Agam Gupta, head of forex trading at Standard Chartered bank in Mumbai.
Local stocks ended up 2.9%, an eighth successive rise that took the market’s gains to nearly 18% during its longest winning streak in 1-“ years.
The stock market is now 40% above its 2009 low hit on 6 March. The rupee has risen 5% from a record of Rs52.20 hit on 3 March.
Foreign investors have been net buyers of more than $1 billion of shares since mid-March, but are still net sellers of about $1.2 billion in 2009.
A sustained rally in shares could bring in more dollar inflows and see the rupee strengthen further, although there was some talk in the market that authorities were concerned about the speed of recent gains.
Dealers said the dollar’s losses against the euro also supported rupee sentiment.
The euro inched up on Wednesday, cutting early losses as a recovery in European share prices prompted some traders to pick up currencies considered to be higher risk.