Mumbai: The rupee strengthened and the benchmark stock index rallied on optimism accelerating economic growth will attract overseas funds to local assets.
The rupee advanced 1.6% since the end of February as overseas funds pumped more than $2 billion (around Rs9,080 crore) into Indian shares, boosting their total holdings to a record $75.3 billion, latest figures show. Asian currencies gained against the dollar after the Federal Reserve pledged to keep its benchmark interest rate near zero for an extended period to help sustain a recovery in the world’s biggest economy.
The rupee seems to be set for further appreciation as the positive trend in stocks will attract more capital flows, said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. The dollar’s broad weakness is adding support to the rupee.
The rupee climbed 0.5% to 45.3525 per dollar, according to data compiled by Bloomberg. It may trade between 45.20 and 45.70 this week, Bhatt said. The currency and bond markets were closed on Tuesday for a holiday.
Offshore contracts indicate bets the rupee will trade at 45.40 to the dollar in a month, compared with expectations of 45.67 on Tuesday. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non- deliverable contracts are settled in dollars rather than the local currency.