Rupee gains 1.2 pct, biggest rise in two weeks

By Subhadip Sircar

MUMBAI (Reuters) - The rupee logged its biggest gain in two weeks on Thursday, helped by foreign fund inflows and bets that a prolonged shutdown of the U.S. government would further delay any tapering of the Federal Reserve's massive stimulus.

Foreign funds were net buyers of over $2 billion in equities in September, the first month of positive purchases after May as foreign money returned to risk assets on the Fed's assurance it would stick to its $85 billion monthly bond purchases.

Inflows via the Reserve Bank of India's (RBI) two concessional forex swap facilities to lenders totalled $3.6 billion till Monday, also helping to stabilise the rupee.

The rupee also got some tailwind from the global dollar, which has been on a losing streak as most investors and speculators cut long bets on the greenback as the U.S. government shutdown drags on.

"The rupee is well supported on inflows and as the greenback fell to an eight-month low against other major currencies after the U.S. government's partial shutdown following lawmakers' failure to approve the budget, triggering fears that the Federal Reserve will further delay tapering its bond-purchase plan," said Param Sarma, chief executive at NSP Forex.

"Any prolonging of the U.S. shutdown would encourage Asian currencies and the rupee to post further gains against the dollar in the very short-term," he said.

The partially convertible rupee closed at 61.735/745 per dollar compared with 62.46/47 on Tuesday, a second session of gains and its best close since August 16. It rose 1.2 percent during the session, its biggest single-day win since September 19.

Still, future bets on the rupee were cautious. A Reuters poll showed that all emerging market currencies, except the Chinese yuan, were expected to depreciate in the next 12 months.

By September 2014, the rupee is expected to fall the most among them - by around 3.5 percent to 64.25 to the dollar.

In the offshore non-deliverable forwards, the one-month contract was at 62.27, while the three-month was at 63.33.

In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 63.14 with total traded volume of $1.98 billion.

(Editing by Prateek Chatterjee and Subhranshu Sahu)