The Indian rupee rallied on Friday to notch its third consecutive weekly gain after a narrowing trade deficit helped ease concerns about the country's fiscal outlook, while signs of foreign flows also helped.
Traders also cited strong buying by foreign investors into Indian debt and stock markets this month, which analysts have attributed in part to hopes for government policy reforms after the presidential elections on July 19.
"Oil imports have been coming down which is helping rein in the deficit. Foreign investors are also gradually bringing in money to invest in the new limits won in the debt auction," said K.N. Dey, director at Basix Forex.
The partially convertible rupee closed at 55.14/15 as per the SBI closing rate, from its Thursday close of 55.93/94. The rupee's 1.4 percent gain for the session was its biggest in over a week.
The local currency rose 0.5 percent for the week, marking its longest weekly winning streak in five months, despite rising worries about the global economy that have pressured global risk assets this week.
The rupee has recovered sharply since hitting a record low of 57.32 on June 22. The gains have been reflected in offshore non-deliverable forward contracts, with one-month contracts quoted at 55.40, while the three-month were trading at 56.06.
In the currency futures market, the most traded near-month dollar-rupee contract on the National Stock Exchange, the United Stock Exchange and the MCX-SX all ended at around 55.25. The total volume was at $5.6 billion.
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