The rupee traded near this month’s high as weekly share purchases by overseas investors exceeded sales for the first time since mid-February.
The rupee closed at 51.43 per dollar at the close of trading On Tuesday, little changed from 51.40 yesterday, according to data compiled by Bloomberg. It rose to 51.2350 earlier, the highest since February 27. The currency has rebounded 1.5 per cent from a record low of 52.1850 reached on March 3.
The currency gained as much as 0.3 per cent earlier after the benchmark equity index rallied almost 10 per cent in the three trading sessions through yesterday, fueling optimism global funds will buy more local assets.
The rupee also rose on bets foreign direct investment will increase as policy makers step up efforts to revive economic growth.
“The rupee has benefited because the positive trend in equities is expected to help improve fund inflows,” said Ravindra Babu, a foreign-exchange trader at state-owned Andhra Bank in Mumbai. “We’ve seen some FDI flows too.”
Funds based abroad bought a net $26 million of Indian stocks last week, compared with net sales of $543 million in the previous five-day period, according to data released by the capital markets regulator Securities and Exchange Board of India.
Offshore contracts indicate traders bet the rupee will trade at 51.75 to the dollar in a month, compared with expectations for a rate of 51.58 yesterday. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.
