The Indian rupee crept up in thin year-end dealing on Wednesday as firmer shares sparked hopes that foreign funds may resume their strong buying of local stocks. The partially convertible rupee tiptoed up to end at 39.42/43 per dollar, above Monday's close of 39.45/46. Markets were closed on Tuesday for Christmas.
"It has been a very quiet session and dollar-rupee has been in a very narrow range. I expect volumes to pick up at the turn of the year," said V. Kumar, chief dealer at State Bank of Travancore.
Indian shares rose 1.7 percent on Wednesday to their highest close in two weeks, powered by index heavyweight Reliance Industries and supported by short covering a day before the expiry of monthly futures contracts. Foreign funds bought about $42 million worth of shares on Monday after selling stocks valued at nearly $1.3 billion in four sessions last week, trimming their net exposure to about $16 billion in 2007.
Dealers said rumours of central bank dollar buying at 39.38-39.40 levels to inject rupee funds into a cash-starved banking system helped keep the local unit in a tight range. The Reserve Bank of India bought $64.5 billion in intervention in the first 10 months of the year and is widely seen as having played an active role in the rupee market in November and December.
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