Mumbai: The rupee rose on Wednesday, bolstered by strong gains on local and global equity markets, though dollar-buying by oil companies checked its advance, dealers said.
At 10:35 am, the partially convertible rupee was trading at 40.330/340 per dollar, stronger than the previous close of 40.45/46.
“Today, much as yesterday, the rupee is taking cues from stocks,” said a trader with a private bank. “Asian markets and even the Dow Jones were in the plus.”
India’s benchmark share index opened 2.6% higher, mirroring most Asian indices, as investors shrugged off fears of a US slowdown on news the Federal Reserve would inject liquidity into credit markets.
The Fed said on Tuesday it would add up to $200 billion in US Treasury bills to improve cash supplies. Four other major central banks also announced measures to boost liquidity.
In reaction, US stocks jumped more than 3% on Tuesday, giving the S&P 500 index its best advance since October 2002.
“But so far, we haven’t seen the rupee going far beyond 40.30. That’s because oil companies have been coming in and buying,” the trader said.
Indian crude refiners buy dollars to meet import commitments.
Oil, regarded as a safe haven from inflation, was trading above $108.50 per barrel on Wednesday, within sight of Tuesday’s record high of $109.72.
India imports more than two-thirds of its oil. An increase in the price of crude would widen the trade deficit and may put further pressure on the rupee.