Mumbai: The rupee recovered from a sharp fall to post its first rise for the week on Wednesday as a strong jump in the stock market raised hopes of more capital inflows, although its gains were blocked as it hit a resistance zone.
The partially convertible rupee ended at Rs47.70/71 per dollar, stronger than its previous close of Rs47.88/90 but below an intraday peak of Rs47.50. On Tuesday it fell 1.25%, its biggest one-day drop in nearly three months.
“There is strong resistance for the rupee near 47.50 per dollar levels, and importer dollar buying is keeping a lid on any sharp moves,” said a senior trader at a foreign bank.
The BSE benchmark index Sensex ended up 3.83% on Wednesday and has risen three-quarters from a 2009 low hit in early March, riding a global rally and fuelled by about $5.5 billion of investments from foreign funds.
Capital inflows are a key driver for the rupee, which is up 9.4% from a record low of Rs52.20 per dollar in early March and is one of the best performing Asian currencies in 2009.
Goldman Sachs expects the rupee to appreciate more as a stable government and strong domestic demand acts as a catalyst for capital inflows. It projects the rupee at 46 per dollar by the end of 2009.