The Indian rupee rose to a three-week high on Thursday, buoyed by a drop in global oil prices and a 1.4 percent rise in the local stock market which raised hopes of foreign fund inflows into the market.
The partially convertible rupee ended at 42.675/685 per dollar, 0.1 percent stronger than Wednesday's close of 42.73/74 and its strongest since June 6.
"The oil prices came down sharply yesterday, by nearly $5 a barrel, and the stock market was also positive, so the sentiment on the rupee was positive since morning," said Paresh Nayar, chief dealer at Development Credit Bank. Softer global oil prices reduces dollar demand from refiners, who are the biggest buyers of dollars in the Indian market.
"If oil prices are lower tomorrow then we may see the rupee open higher than 42.65 per dollar," Nayar said. Dealers said exporters were also selling dollars on expectations the rupee may remain stronger than 43 per dollar if the central bank took further steps to tame inflation.