Mumbai: The Indian rupee strengthened on Thursday in tandem with Asian peers and supported by firm stocks, and traders said it could breach 44 to the dollar for the first time in more than two years.
Record foreign buying of domestic stocks has been the main driver for the rupee, and the inflow is expected to rise when Coal India opens a $3.5 billion IPO next week.
At 10:38am, the partially convertible rupee was at Rs44.2150/2250, stronger than Wednesday’s closing of Rs44.51/52.
“So far, oil importers have not come into the market. There is an outside chance for the rupee to break 44 if equities rally,” said a dealer at a foreign bank.
Broadly, however, the rupee is seen moving in 44.15-44.35 band.
The Reserve Bank of India is reluctant to intervene in currency markets but may be forced to in coming weeks as foreign investors pour in billions of dollars to buy shares in the country’s largest ever IPO.
The Coal India initial public offer, which opens on Monday, is expected to attract huge foreign funds into the country and may push the rupee up to 43.50.
The main stock index rallied to a 33-month high in early trade, but turned choppy as investors began taking profits.
Since the start of September, the rupee has appreciated 6.4% on foreign equity inflows of around $9 billion. For the year to date, the rupee is up 5.2% on record foreign investment of $21.8 billion in stocks.
The dollar marked a 10-month low against a basket of currencies on Thursday, coming under broad selling pressure after Singapore widened the trading band of the Singapore dollar, letting its currency hit a record high.
The index of the dollar against six majors was down 0.7%.
One-month offshore non-deliverable forward contracts were quoted at Rs44.43, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, MCX-SX and United Stock Exchange were at 44.3325, 44.3325 and 44.3300 respectively, with the total traded volume on the three exchanges at a low $2.4 billion.