Mumbai: The rupee rose to its highest in a week on Friday, as gains in equities supported expectations of capital inflows into Asia’s third-biggest economy, and a weaker dollar overseas also bolstered sentiment.
The partially convertible rupee ended at Rs48.10/11 per dollar, its highest close since 19 May according to Thomson Reuters data, and about 1% stronger than its previous close of Rs48.595/605.
On Tuesday, it had hit Rs48.90, its lowest since mid-May.
“Stocks have been the biggest support to the market. If the momentum picks up next week, we may see the rupee strengthening beyond 48 a dollar levels,” a senior trader with a foreign bank said.
Indian shares rose 2.9% on Friday, taking the market to its best close in almost two weeks, as investors took cues from Asian and European markets.
Fund flows into shares have been a key driver of the rupee, which hit a record low of Rs52.2 in early March but rebounded as foreign investors bought about $8 billion of stocks over three months.
However, since mid-June foreign investors have sold about $900 million of stocks, and the rupee has fallen about 2% so far this month.
Dealers said the dollar’s weakness overseas added support to the rupee. The dollar index, a gauge of the US unit’s performance versus major currencies, was down 0.8% at 05:32 pm, as a series of global liquidity measures boosted investor sentiment.