Rupee gains for 2 days in a row

The Indian rupee gathered strength for the second day in a row on Friday as a result of the foreign investment flow and rising stock markets.

The rupee ended at 43.42 to a dollar, off an intraday high of 43.30, but 0.2 per cent stronger than yesterday’s close of 43.51-52. The rise came after the currency fell for nearly a week. Despite appreciating for two days in a row this week, the rupee was down 0.86 per cent against the dollar. Yesterday, it had hit a low of 43.86.

The appreciation is a reflection of inflows from portfolio investors and certain transactions as also some recovery on the bourses, the head of forex trading at a foreign bank said. A dealer said dollar supplies as a part of Volvo’s $275-million investment in Eicher Motors had arrived on Thursday and early on Friday, helping the rupee to rise. Dealers said a 1.1-per cent rise in the domestic share market after a sharp fall in the previous session also helped sentiments, although the stock market is still down 29 per cent since the start of 2008.

However, the dollar demand from oil firms and other importers trimmed the rupee’s gains. Global crude oil prices have risen by $6 a barrel. Dealers said under normal circumstances, the rupee may track oil prices and stocks.

The Indian currency had appreciated to Rs 42.06 on August 8, while it touched a 17-month low of 43.87 earlier in the week. The sharp depreciation was attributed to a stronger dollar movement in the international market and a lower demand for stocks.

After a sharp appreciation in the first week of August, the rupee is now correcting itself and is expected to continue in the range of 43.30-60, a dealer of a private bank said.