Mumbai: The rupee strengthened on Friday as strong gains in local shares buoyed hopes for fresh capital inflows, while the dollar’s slide against other major currencies overseas helped sentiment.
The partially convertible rupee closed at Rs48.78/80 per dollar, 0.5% stronger than Thursday’s close of Rs49.03/04. Over the week, though, it lost 1% as stocks dropped 0.9%, its fourth dip in seven weeks.
“There was good two-way interest in the market today - oil companies were buying dollars while exporters were there to sell, holding the rupee in a range,” a senior dealer at a foreign bank said.
“The rupee is likely to stay like this for some time now. It may trade in a Rs48.40 to Rs49.10 range next week,” he added.
Shares rose 3% as global risk aversion worries eased after the United States rescued Bank of America and triggered gains across Asia and in Europe.
Foreign funds have withdrawn about $410 million from local equities this year, after pulling out more than $13 billion in 2008, but a rise in stock prices could turn the tide.
Dealers said the dollar’s weakness against other major currencies also boosted sentiment for the rupee.
The euro and the higher-yielding currencies gained against the dollar and yen on Friday as share prices rebounded, buoyed by optimism after the US government pledged to provide fresh financial aid to Bank of America.
The US dollar index, which measures the dollar’s strength against other major currencies, was down nearly 1%.
One-month offshore non-deliverable forward contracts were at Rs48.97/49.07, weaker than the onshore spot rate.