Mumbai: The rupee strengthened on Friday as a weaker dollar overseas prompted banks to cut long positions in the US currency, while gains in the share market triggered hopes for capital inflows.
The partially convertible rupee closed at 48.67/48.68 per dollar, 0.4% stronger than Thursday’s close of 48.85/48.86. The rupee ended flat on the week. “There was no (dollar) demand from the oil companies today as they covered quite a bit in the previous session, and since stocks also rose, there was no other demand, helping the rupee’s rally,” the chief dealer with a state-run bank said on Friday.
India’s benchmark stock index, the Sensex, rose 1.8% on Friday, posting its second weekly gain in six, on expectations for fiscal incentives to revive growth in an interim general budget on Monday.
“The market is expecting rate cuts, but that will not come in the interim budget. However, the market seems to be prepared for about 50 basis points cut in the repo rate soon,” the dealer added. Hundred basis points equal one percentage point. Repo rate is the policy rate at which the Reserve Bank of India injects liquidity into the financial system.
Foreign funds have sold $972 million (Rs4,734 crore today) worth of Indian shares in 2009, after dumping equity of nearly $13 billion last year.
Dealers were watching the dollar’s performance overseas for cues. The yen and the dollar fell on Friday as world stock markets rose on hopes for a US government programme to subsidise mortgages.