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The rupee rose to its highest level in nearly eight months on Tuesday as continued foreign fund inflows into the domestic share market helped, while a breach of a key technical resistance added to the local unit's momentum.
The rupee closed at Rs 60.48 per dollar compared with Rs 60.79 on Monday. The rupee rose as high as 60.43 during the session, its strongest since August 1.
Traders expect the rupee to continue trading with an upward bias, helped by record high local shares with the upcoming national elections being the key focus point.
The BSE Sensex ended flat after hitting their second consecutive record high in as many sessions as blue chips such as Larsen & Toubro extended recent gains bolstered by buying from foreign institutional investors.
Foreign funds bought shares worth $240 million on Monday, taking their total purchases in 2014 to $2.6 billion. Foreign inflows into the debt market stand at a net $5.9 billion so far this year.
"The rupee is inching gradually higher to test the next resistance at Rs 60.30 and major resistance at Rs 60.00. As we approach the election dates, the market is betting on the formation of a stable government at the centre," said Param Sarma, director and chief executive officer at NSP Forex.
"We believe that the major resistance at Rs 60 will hold as the central bank will be looking to buy the dollars to preserve export competitiveness in the background of global economic recovery taking shape," he added.
Dealers said losses in other Asian currencies and demand from oil refiners limited gains in the rupee.
Most emerging Asian currencies turned weaker as the Chinese yuan retreated, failing to keep earlier gains even though hopes for economic stimulus from Beijing could improve regional sentiment.
In the offshore non-deliverable forwards, the one-month contract was at Rs 60.92 while the three-month was at Rs 61.59.
The rupee had touched an all-time low of Rs 68.85 per dollar on August 28. Since then the rupee has appreciated by almost 14%.
