The rupee pared early losses to end the day 20 paise up against the US currency as Budget proposals to allow overseas borrowings for more sectors and doubling import duty on gold boosted the sentiment on domestic currency.
After a volatile trade, the rupee closed 20 paise higher at 50.18/19 a dollar. The gain in rupee in contrary to the sharp fall in stocks, as the BSE Sensex fell by 210 points, and strong dollar overseas.
Analysts said Budget proposals to allow ECBs for aviation, power, road and other sectors raised hopes of more fund flows to the country.
The government's move to hike import duty on gold, which is expected to impact demand, also boosted the rupee they said. India is the largest gold consmuer and gold imports account for a large chunk of country's total purchases.
The local currency opened strong at 50.27/28 at the Interbank Foreign Exchange (Forex) market in line with early rise in stocks. It turned negative at mid-session and hit a low of 50.43.
However, fag-end dollar selling by exporters and some banks aided the rupee to close at 50.18/19 against yesterday's close of 50.38/39, up 0.39%.
FIIs pumped in $36.42 million yesterday, taking the total to over $1.4 billion in the current month till March 15 and over $8.6 billion in 2012 so far, as per the Sebi data.
"The rupee showed a upward correction on account of profit booking in dollar today after swiftly depreciating to 50.48 levels yesterday," India Forex Advisors CEO Abhishek Goenka said.
The dollar index, consisting of six ajor currencies, was up by a mere 0.06%, while New York crude oil was trading at nearly $105.5 a barrel in European market today.
