Mumbai: The rupee strengthened for the fourth day, its best run in almost three weeks, as overseas investors bought more local equities to benefit from rising company profits.
International investors were net buyers of local shares for 16 straight days through 20 July, helping the rupee rise to the highest since May 1998, the second best performance among the 10 most active Asian currencies this year.
“The direction for the rupee is quite clear given the flows we’re seeing,” said V. Rajagopal, chief currency trader at Kotak Mahindra Bank Ltd in Mumbai. “Sentiment is bullish for the rupee. It could break to new levels sooner rather than later.” The currency gained 0.1% to 40.2675 against the dollar as of 5pm close in Mumbai. The rupee may rise to 40 in the next few days, he added.
Overseas funds have bought $9.91 billion (Rs39,838 crore) of stocks through 20 July, more than the $8 billion investment they made in all of 2006.
The rupee’s advance was tempered by speculation the central bank will sell the currency to stem a rally that hurts exporters.
“The central bank would be concerned for exporters as the rupee rises,” said Rohan Lasrado, a currency trader at HDFC Bank Ltd in Mumbai. “Speculation of the central bank being in the market is increasing and that should help the dollar.”