Mumbai: The rupee rose against the dollar to the highest in two months as dealers sold the US currency on expectation that the government’s latest initiatives will help contain the high fiscal deficit.
Foreign institutional investments in the stock market also helped the rupee rise to its highest level since November.
At 2 pm the rupee was trading at 53.86 per dollar after touching a high of 53.83, up 1% from Thursday’s close of 54.39.
“Equity markets are also strong and yesterday’s (Thursday) announcement by the government allowing oil marketing companies to decide on diesel price hikes will reduce the subsidy and keep fiscal deficit in check,” said N.S. Venkatesh, head, treasury, IDBI Bank Ltd.
The benchmark 30-share Sensex was up 70 points at 20,040 points, its highest in two years on the prospective of continuing demand for shares by foreign institutional investors (FIIs).
Foreign institutional investors (FIIs) have bought shares worth $584 million in the first three days of this week. Since 1 January, they have invested $2 billion in the Indian markets, supporting the rupee.
“There has also been FII interest in the debt market after the government allowed them to put in $2 billion,” he said. Those investments have to be made by 23 January, “so we are getting dollar inflows from both debt and equity”, he said, adding that he expects the rupee to remain strong in the 52.50-54 per dollar range in the next one month.