The Indian rupee strengthened markedly on Friday as gains in Asian stock markets and higher-than-expected economic growth figures raised market expectations of a pick up in capital inflows, traders said. The partially convertible rupee ended at 40.875/885 per dollar, up about 0.7 percent from Thursday's close of 41.16/17.
Traders said the rupee's rise was given a boost when exporters sold huge amount of dollars at 41 per dollar. "Strong markets in Asia raised hopes that the problems in the subprime markets would be sorted out soon and bring confidence among global investors," a state-run bank trader said.
Asian stock markets gained as investor confidence rose ahead of US President George Bush's proposals to address the subprime crisis and expectations of a rate cut by the Federal Reserve.
India's strong growth in recent years has attracted overseas investment, supporting the rupee. Net foreign direct investment more than doubled to $19.4 billion in the fiscal year that ended in March from $7.7 billion in 2005/06. The main share index rose 1.3 percent on Friday, helped by the robust GDP data. The worries of a global credit squeeze have seen foreign funds sell a net $2 billion of stocks this month, cutting their net purchases to $8.2 so far this year.
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