Rupee closes at 6-week high, gains 65 paise

Rising equity markets, monetary easing and approval for greater access to foreign funds to invest in government-backed securities propelled the Indian rupee to close at a six-week high of 65.51 to a US dollar in the just-concluded weekly trade.

The rupee last breached the 65.55-level on August 20. The Indian currency gained for four consecutive sessions to strengthen by 65 paise in the weekly trade ended October 1.

The rupee stood at 66.16 to a US dollar on September 24, its previous weekly closing. On Thursday, it gained 7 paise at 65.51 from its previous close of 65.58 against a greenback.

The Indian rupee gained 38 paise on Wednesday to close at a five-week high of 65.58 against the US dollar.

The rupee's rise is concurrent to the expectations that more foreign funds will flow into the Indian equity markets.

The Indian equity markets continued their upward trajectory in the weekly trade ended October 1, after the Reserve Bank of India (RBI) cut key lending rates by 50 basis points.

The equity markets were anticipating an easing of only 25 basis points.

The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE) gained 357.45 points or 1.38 percent to 26,220.95 points from its previous weekly close of 25,863.50 points.

"Gains came on the back of RBI's rate cut on Tuesday. That has buoyed both the currency and equity markets. The selling by exporters and foreign banks also buoyed the rupee," Hiren Sharma, senior vice president, currency advisory at Anand Rathi Financial Services, told IANS.

On Tuesday, the Reserve Bank said it intended to provide a more predictable regime for investment by foreign funds and decided to raise their exposure limits in phases in central government securities to 5 percent of the outstanding stock by March 2018.

In another key decision, the central bank set a separate limit for investment by such funds in state development loans, which are to be increased in phases to reach 2 percent of the outstanding stock by March 2018.

"The quarter-end dollar selling by the information technology (IT) companies and the RBI announcement of giving greater access to foreign funds to invest in central and state government bonds supported the rupee," Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

The RBI's decision on Tuesday is expected to usher in around $2.5 billion by this fiscal end.