Re rises towards 1-wk highs on $ drop

The rupee rose on Tuesday, towards a more than 1-week high touched in the previous session, as mild gains in local shares and the $'s losses versus majors helped.

However, dealers said, the Reserve Bank of India's rate decision due at 0600 GMT, would be key for further direction.

At 9:20 a.m., the partially convertible rupee was at 46.87/88, stronger than Monday's close of 47.04/05 when it had touched an intraday high of 46.80, its strongest since July 16. So far the unit has traded in a range of 46.86 to 46.93.

The Reserve Bank of India is widely expected to raise key interest rates by 25 basis points.

 

Rate hikes could temporarily hurt the rupee if stocks fall, but in the long run would help the rupee gain due to the interest rate differential.

Indian shares rose 0.2 percent in early trade on Tuesday, with Reliance Industries leading the rise, taking cues from strong Asian markets.

The euro held near a two-month peak against the dollar on Tuesday on relief over stress tests on European banks, but it was capped at $1.30.

The index of the dollar against six major currencies was down 0.14 percent and would be watched for cues, dealers said.