Mumbai: The rupee crept to near two-month high on Wednesday as a stronger stock market heightened expectations for more capital flows into the domestic market.
The partially convertible rupee ended at Rs47.52/53 per dollar, 0.44% stronger than Rs47.73/74 at its previous close when it hit Rs47.43 during trade, its highest level since 12 June.
“The rise in the stock market is pushing the rupee up as the reforms outlook looks brighter but it might run into some resistance around the 47 levels,” said a dealer at a foreign bank.
He said the rupee was likely to stay in a 47.40-47.80 band in the near term, but could head towards 46.80.
Volume was lower than usual as most banks stayed on the sidelines ahead of a two-day strike by state-run banks.
Capital flows into the share market are a key driver for the local unit. Foreign investors have so far in 2009 bought $7.6 billion worth of local stocks, after net sales of more than $13 billion last year.
The rupee has gained 0.8% since end-June and is up 2.4% so far in 2009.
The BSE stock index rose 0.5% on Wednesday. The Sensex has risen almost 98% from a 2009 low in March and is up 65% this year.
“Dollar weakness will continue to underline rupee movements over the near term. We expect the rupee to stabilize to 46.00-46.50 by end-March 2010 governed by fundamentals,” Yes Bank analysts wrote in a note.
The finance minister Pranab Mukherjee on Tuesday said that economic reforms were needed to get back to at least 9% growth at the earliest.
The yen edged up on Wednesday as traders locked in profits from gains in currencies perceived to be higher-risk.
In the currency futures market, the most traded near-month contract on the National Stock Exchange and MCX-SX was quoting at 47.6150 and 47.6225 respectively, with the total traded volume on the two exchanges at about $1.8 billion.