The Indian rupee strengthened past 45.00 per dollar on Monday for the first time in than 5-1/2 months, aided by capital flows from foreign investors into the local share market which ended at a record high.
The market is waiting on a central bank policy review on Tuesday. While analysts are split on whether or not rates will be increased, a rate rise would be expected to boost the rupee. The partially convertible rupee ended 0.47 percent higher at 44.97/98, its highest since May 12, according to Reuters data. The rupee had closed at 45.18/20 on Friday. The benchmark stock index rose above 13,000 points for the first time on Monday, helped by favourable corporate earnings reports and foreign buying.
Net foreign buying of stocks worth close to $3.5 billion since August has also helped the rupee recover from a three-year low of 47.04 that was hit in July.
"So far, we have seen very good inflows. We could see 44.80 being tested soon and 44.50 also looks a possibility," said Paresh Nayar, chief dealer with Development Credit Bank. The dollar's weakness against the yen in early trade also aided sentiment on the rupee. Traders said dollar buying by oil firms slowed down on Monday.
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