By Neha Dasgupta
MUMBAI (Reuters) - The rupee ended at a two-week closing high on Friday, tracking broad-based strength in Asian currencies against the dollar and continuing large foreign inflows into Indian financial markets, particularly debt, aiding gains.
For the week, the rupee staged a turnaround, snapping a five-week fall. The local unit bucked the broader trend in Asia by gaining 0.4 percent on the week, although it was not alone as the Philippine peso also rose 0.8 percent.
Foreign institutional investors (FIIs) have bought debt worth $1.2 billion so far in December, while equity inflows stand at $650.8 million, as per regulatory data.
In early trades, the dollar lost some ground against major currencies after European Central Bank chief Mario Draghi did not immediately expand the stimulus programme but gave indications to do so early next year.
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For much of the session, the rupee traded in a narrow band as traders awaited the U.S. non-farm payrolls data, due at 1330 GMT, for clues on the U.S. rates outlook.
If the data comes in stronger-than-expected it would power the dollar and hurt Asian currencies, including the rupee, on Monday.
Traders say the Reserve Bank of India is likely to prevent any sharp falls in the rupee, while foreign inflows should also cushion any blows.
"A sudden reversal in the dollar index, which is highly overbought, can help the rupee appreciate to 61.60 (per dollar) next week," said Hemal Doshi, a currency strategist at Geojit Comtrade Ltd.
The partially convertible rupee closed at 61.77/78 per dollar, the highest closing level since Nov. 21. It finished at 61.9250/9350 on Thursday.
Trading volumes, however, took a hit as staff at state-run lenders in the Western region, including Mumbai were away as bank unions across India are pressing for early wage increases through a four-day relay strike.
In the offshore non-deliverable forwards market, the one-month contract was at 62.01/11, while the three-month was at 62.52/62.
(Editing by Prateek Chatterjee)
