The Indian rupee shook off a weak start to rise smartly on Thursday, with sentiment boosted by gains in the stock market and expectations that overseas investors would keep pouring funds into a fast-growing economy.
The rupee ended at 40.79/80 per dollar, climbing from Wednesday's close of 40.90/91, and an intra-day low of 40.967. It hit a nine-year peak of 40.20 in July.
"There were good inflows today, and it looked like they were portfolio-related investments," said a senior dealer with a foreign bank. Indian shares rose 1.10 percent to a six-week closing high as some Asian and European markets boosted confidence despite lingering concerns about the health of the US economy.
Capital inflows into Indian equities have been a key support for the rupee, which has gained about 8.5 percent this year against the dollar to be Asia's best performing currency.
In the first two days of this week, foreign funds bought almost $290 million of Indian shares, after being net sellers of about $1.9 billion last month. Data released last week showed India's gross domestic product grew at a higher-than-expected annual rate of 9.3 percent in the June quarter, raising hopes for renewed overseas investment flows.
Still, the rupee ran into resistance as refiners bought dollars in the wake of rising oil prices. London Brent crude was trading near $74.5 per barrel as investors expected US refinery snags and slower imports to drain gasoline and crude stocks in the world's biggest consumer. Oil is India's largest import.
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