The rupee rose for a second session on Friday to a six-week closing high, buoyed by a rising tide of foreign fund inflows that helped it shrug off the dollar's climb to a 10-month peak against an index of currencies. Traders said portfolio flows were so robust that some large foreign banks had to cut long dollar positions taken in early trade following a US interest rate rise and signs the Federal Reserve would stick to measured rate increases.
The partly convertible rupee gained 0.06 percent to close at 43.4850/4900 per dollar, its highest close since May 20.
"The rupee is increasingly being seen as one of the stronger currencies, like the Australian dollar," a trader at a state-run bank said. "We are seeing far more selling interest (in the dollar) despite the dollar's gains overseas."
The rupee has strengthened 0.67 percent since June 1, riding a huge swell of $1.33 billion of foreign fund inflows in June into rallying Indian stocks. The benchmark BSE index closed on Friday at a new high for a second straight day.
Traders said with New York banks closed on Monday for the US Independence Day holiday, the rupee was likely to notch up more gains on lower demand for cash dollars and could test the 43.47 level.