Mumbai: The rupee recovered from a an early fall to end stronger on Tuesday as rising share prices reinforced expectations of higher capital inflows in the coming months.
The partially convertible rupee ended at Rs47.48/49 per dollar, about 0.2% higher than Monday’s close of Rs47.555/565. During trade it hit a low of Rs47.80, its weakest since 28 May, and rose as far as Rs47.395.
“Some banks covered their short rupee positions. Plus, a strong stock market helped sentiment,” a senior dealer with a foreign bank said.
“The rupee was moving in line with cross-currency movements and the euro’s losses to the dollar.”
The main share index rose 3.1% on Tuesday to its highest close in 10 months.
Analysts said a bullish trend in equities would encourage more capital inflows, pushing the rupee higher.
“In addition to risk appetite, with India back on the radar following the election results, capital flows are likely to remain buoyant. This will result in a continued appreciation in the rupee,” Citigroup said in a research note.
Foreign capital is a key driver of the rupee, and hefty portfolio inflows of more than $6.5 billion since mid-March have helped lift the rupee about 10% from a record low of Rs52.2 touched in early March.
One-month offshore non-deliverable forward contracts were quoting at Rs47.60/70, slightly weaker than the onshore spot rate.