Mumbai: As the Bombay Stock Exchange (BSE) Sensex surged 3% and prompted some banks to sell their dollar holdings, the rupee climbed to a three-week highs on Monday, while a marginally weaker dollar overseas also helped.
The partially convertible rupee closed at Rs48.57/58 per dollar, 0.2% stronger than its previous close of Rs48.67/68.
During the session it touched Rs48.56, its strongest since 19 January.
“The market was very quiet today, there was not much happening, but some custodial banks sold dollars in late trade,” a senior dealer with a private bank said.
Dealers said the rupee opened stronger on expectations of gains in shares, and stayed in a Rs48.56 to Rs48.65 band later.
Domestic stock markets rallied 3% on Monday to their highest close in a month, as hopes for further stimulus were reinforced by official estimates showing the economy was expanding at its slowest pace in six years.
The economy is expected to grow 7.1% in 2008-9, sharply lower than 9% last fiscal year, boosting hopes for interest rate cuts and other measures. A top official said growth could be helped if fiscal stimulus was sustained.
The rupee’s fortunes in recent years have been largely driven by capital flows into and out of the economy. So far in 2009, foreign investors have sold about $1 billion worth of shares after selling more than $13 billion last year.
Dealers said the dollar’s weakness against some currencies overseas also helped sentiment. The dollar index, a gauge of the US unit’s performance against the majors, was 0.2 % lower.
One-month offshore non-deliverable forward contracts were at Rs48.61/71, weaker than the onshore spot rate.