MUMBAI: The rupee strengthened to a two-week high on Wednesday as a broad fall in the dollar versus major units and a firm domestic stock market boosted sentiment.
At 10:40 a.m. (0510 GMT), the partially convertible rupee was at 45.97/98 per dollar, after rising to 45.95 early, its highest since Feb. 3 and half a percent stronger than its 46.21/22 close on Tuesday.
"Strong US data, a higher close for Dow Jones, followed by a strong show by regional markets is helping the rupee. Asian currencies are also stronger today," said R.K. Gurumurthy, head of treasury at ING Vysya Bank.
A gauge of manufacturing in New York state rose in February as inventories jumped, the New York Federal Reserve said in a report on Tuesday.
"Dollar/rupee should hold above 45.90 today, but still no change to the overall view that rupee should weaken for a while after this brief strength in line with broader dollar weakness in the short term," Gurumurthy said. The rupee would resume its upward trend in the longer term, he added.
The index of the dollar against six major currencies was down 0.1 percent. Most Asian currencies were stronger against the dollar.
The euro steadied on Wednesday to hold sharp gains made the previous day as investors cut short positions on views that the fall in the euro over Greek debt woes had run its course.
Dealers said they would watch the stock market for cues on fund flows. There have been net outflows of about $500 million from local shares so far this year, against inflows of $17.5 billion in 2009.
Shares were trading 1.5 percent higher early Wednesday with Reliance Industries and Housing Development Finance Corp leading the rise, taking cues from strong Asian markets.
One-month offshore non-deliverable forward contracts were quoting at 45.93/46.03, little changed from the onshore spot rate. In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were both quoting at 46.00, with the total traded volume on the two exchanges at about $965 million.
