By Swati Bhat
MUMBAI (Reuters) – The Indian rupee strengthened to its highest level in more than three months on Friday as investors bet on further declines in the dollar amid expectations of further inflows, with support from the central bank’s non-intervention in the spot market.
The partially convertible rupee firmed to 74.60 per dollar in early trade, its highest since March 27. By 0630 GMT, the unit was trading at 74.85/85 versus its close of 75.01 on Thursday.
“Looks like (the rupee) is to set appreciate since lots of flows lined up,” said Paresh Nayar, head of forex and fixed income trading at First Rand Bank.
A spot poll of five traders suggested the rupee is likely to appreciate towards 74 levels if the Reserve Bank of India stays out of the market, but some sporadic dollar buying pulled the unit off highs, they said.
The central bank, which has been aggressively buying dollars in recent weeks, stayed away on Thursday, triggering a massive rally in the rupee.
Dollar purchases by the RBI have been a key factor helping the country’s forex reserves climb to a record above $500 billion recently.
On the global front, meanwhile, the dollar has been holding in a narrow range supported by safe-haven flows.
Flows related to Reliance Jio’s stake sale in its digital subsidiary and the recently approved fund raising plans by Axis Bank have triggered inflows, along with rising portfolio flows into stock markets.
Foreign investors bought a net $2.39 billion worth of shares in June, but remain net sellers of $2.53 billion so far in 2020.
Local shares traded near four-month highs tracking gains in broader Asian markets after robust data from the United States and China bolstered hopes of a global economic rebound, but a record spike in domestic coronavirus cases capped gains.
(Reporting by Swati Bhat; Editing by Sriraj Kalluvila)