Mumbai: The rupee climbed to a 5-month high on Wednesday boosted by rising dollar inflows into equities, and traders said it could further appreciate if the euro extended gains.
Data from the market regulator showed foreign funds bought $2.5 billion of shares since the start of March, after being net sellers in January and February.
At 11:30am, the partially convertible rupee was at Rs 44.2500/2525 per dollar, after touching Rs 44.23, its strongest since 5 November. It had closed at 44.42/43 on Tuesday.
“44.20 is a very crucial support level. So I hope 44.20-44.30 should be the range as of now,” said a dealer with a state-run bank.
He said expectations for a rate rise by the European Central Bank was driving the euro. “If the euro strengthens in the afternoon, we may see 44.20 breaking,” he said.
The ECB is largely expected to raise interest rates on Thursday that could keep the euro zone’s common currency supported in the months ahead.
The rupee could strengthen to 44.00-44.05 if it breaks past 44.20, the dealer said.
The euro was up 0.3 percent against the dollar at $1.4258 , having reached a five-month-high of $1.4269 on Monday.
The index of the dollar against six major currencies was down 0.14 % at 75.774 points. It had been at 76.037 points at the close of the local forex market on Tuesday.
The one-month onshore forward premium was at 25.75 basis points (bps), down from 27.50 bps on Tuesday, the three-month was at 79.75 bps versus 80.00 bps and the one-year at 298.25 bps versus 295.25 bps.
The one-month offshore non-deliverable forward contracts were quoted at 44.47, weaker than the onshore spot rate.
In the currency futures market , the most traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange were all at 44.4275, with the total volume at about $1.57 billion.