Rupee surges on high foreign fund flows

MARKET ROUND-UP

The rupee gained on speculation accelerating economic growth will attract more overseas investors to local stocks.

Global funds have bought more Indian shares than they sold in the three days through March 9, the longest run of net purchases since February 20. The benchmark stock index rose for a second day, its best run in more than three weeks.

"There is still a strong bias for the rupee,'' said Siddhartha Sapru, head of treasury at SBI Commercial & International Bank in Mumbai. "Capital flows continue to support the rupee. I expect the foreign direct investment flows will exceed the portfolio flows.''

The rupee rose to 44.2238 against the dollar as of the 5 pm close in Mumbai, from 44.2388 yesterday, according to data compiled by Bloomberg. Industrial production in Asia's fourth-largest economy grew more than expected in January, stoked by surging consumer demand, the government said yesterday.

The currency weakened earlier on speculation the central bank will sell the rupee as it traded near the highest in two weeks.

The Reserve Bank of India has stepped up purchases of foreign currency according to the most recent data from the central bank. The buying may have prevented the rupee from extending gains after it climbed to a one-year high last month.

"There has been speculation of dollar purchases by the central bank,'' said V Rajagopal, chief currency trader at Kotak Mahindra Bank in Mumbai.

"That may prompt some traders to cover short dollar positions. The rupee may be under some pressure for a while.'' A short position is a bet on a currency's decline.

India's foreign-exchange reserves rose by $14.51 billion in the four weeks through March 2, compared with a $5 billion gain in the three months ended January 31, according to the central bank.

The central bank doesn't comment on daily market operations, spokeswoman Alpana Killawala said.