The Indian rupee gained over five paise at 42.89/90 against the greenback on Tuesday on a fresh surge in local stock markets, giving hopes of capital inflows, the key driver of the local currency, amid easing crude prices.
At the Interbank Foreign Exchange (forex) market, the local currency was trapped in a small range of 42.86 and 42.93 during the day after resuming firm at 42.90/91 a dollar.
The rupee had close at 42.9450/9550 a dollar on Monday.
Forex dealers said the rupee also drew support from dollar selling by exporters after the stock markets turned buoyant in anticipation of higher collection of advance taxes from corporates.
They said weak dollar in overseas markets also aided the rupee sentiment.
Strong equity markets could attract fresh capital inflows, the major factor for the rupee's sharp appreciation in the last calendar year.
Foreign Institutional Investors (FIIs), however, have pulled out more than 5.0 billion dollars so far in the current calendar year following the US credit crisis, having adverse impact on the rupee sentiment.
The activity was dull at the exchange market in the absence of any market moving factors, said a leading dealer at a public sector bank.
Oil refiners too slowed down dollar purchases as global crude prices remained around 134.50 dollars a barrel, after sniffing 140 dollar level in New York trading on Monday, traders said.
Indian benchmark Sensex today soared by 301 points or 1.96 per cent while other Asian indices ended in the red.
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