Mumbai: The Indian rupee rose to its strongest level in over two weeks on Thursday, boosted by a 2.1% gain in local shares and a steep slide in the dollar versus major currencies after the Fed announced more easing.
The partially convertible rupee closed at Rs44.20/21 per dollar, after hitting 44.1950, its strongest since 19 October and 0.3% stronger than 44.35/36 at the close on Wednesday. On the week, the rupee gained 0.5%.
The rupee traded in a range of 44.1950-44.3450 on Thursday. Financial markets will remain closed on Friday for a local holiday.
“There was good two-way interest in the market today. Good selling on account of the euro. State-run banks were on the buy side while foreign banks sold dollars,” said Hari Chandramgathan, a foreign exchange dealer with Federal Bank.
The dollar fell sharply on Thursday, hitting a 28-year low versus the Australian dollar, as a Federal Reserve decision to buy more US government debt triggered demand for risk and undermined the US currency.
The Fed said on Wednesday it would buy $600 billion more in Treasuries by the middle of next year in an attempt to reinvigorate a flagging recovery, more than the $500 billion markets were generally expecting.
The index of the dollar against six major currencies was down 0.7% when the rupee market closed.
“The sell mode for the dollar is back now, shares are rallying and unless there is a major correction there, the rupee should rise past 44 per dollar early next week,” the chief forex dealer with a foreign bank said.
Shares rose 2.1% to a record closing high, boosted by the stellar listing of Coal India, the country’s largest-ever share offering, but market participants said the euphoria was leading to a sense of caution.
Foreign buying of local shares has reached a record $26.6 billion so far in 2010, helping the rupee gain 5.3 percent. Last year, inflows of $17.5 billion helped the rupee rise 4.7%.
One-month offshore non-deliverable forward contracts were quoted at 44.32, weaker compared to the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, MCX-SX and United Stock Exchange closed at 44.39, 44.3875 and 44.3925 respectively, with the total traded volume on the three exchanges at a low $4.7 billion.