Rupee ends at eight-month closing high

The rupee ended Monday at its highest closing level against the dollar in nearly eight months as continued foreign inflows sent shares to record highs, although further gains in the currency were capped by strong demand from oil firms.

The rupee ended at Rs 60.79 compared with previous close of Rs 60.93 per dollar marking its strongest close against the dollar since August 1. The rupee had opened at Rs 60.86 and during intra-day trades the rupee touched a high of Rs 60.65, its strongest since March 11.

Domestic shares jumped nearly 1.5 percent on Monday to an all-time high, surpassing their previous record hit just last week, as lenders including ICICI Bank extended a recent rally.

Foreign funds have bought shares worth $2.3 billion so far in March, taking total inflows in 2014 to $2.6 billion.

"Custodian banks were offering dollars but good bids came in from state-run banks, pulling the rupee off highs," said Hari Chandramgethen, head of foreign exchange trading at South Indian Bank.

Traders said gains in other Asian units also underpinned sentiment for the rupee after the yuan rebounded from its 13-month low.

“For 2014 I expect the appreciation in rupee to continue except for certain short-term instances of weakening. The appreciation will be driven by a comfortable Current Account Deficit (CAD).

If there is a stable government after the elections the fundamentals will improve and it shall help to attract foreign flows in India,” said Anjali Verma, economist at MF Global India.

In the offshore non-deliverable forwards, the one-month contract was at Rs 61.13, while the three-month was at Rs 61.81.