The rupee closed at an over two-month high closing at 61.07 to the dollar, buoyed by a rising domestic equity market and sale of dollars by foreign banks.

The Indian unit, which opened 32 paise stronger at 61.08 against the previous close of 61.40, was also helped by the Reserve Bank of India’s notification allowing banks, which are authorised to deal in foreign exchange, greater flexibility to access overseas funds.

The benchmark 30 stock BSE Sensex closed 1.26 per cent (255.68 points) up at 20,528.59.

A public sector bank dealer said, “Among others, strong equity markets, dollar selling by custodial (foreign banks), Standard Chartered Bank’s report revising India’s current account deficit forecast lower, and the RBI providing banks flexibility to borrow from overseas supported the rupee.”

The RBI on Thursday allowed banks authorised to deal in foreign exchange to borrow from their head office or overseas branches or correspondents outside India or any other entity (international/ multilateral financial institutions) up to 100 per cent of their unimpaired Tier I capital or $10 million, whichever is higher. Banks can borrow from these entities for a limited period up to November 30, 2013, for general banking business and not for capital augmentation.

Standard Chartered Bank, in its research report, revised India’s current account deficit (CAD) forecast for FY2014 to $45 billion from $71.8 billion. Less concern about CAD should improve foreign investors’ perception of India’s external-sector dynamics, it said.

Forex market dealers expect the rupee to settle in the 59-60/$ range in the next couple of weeks.

ramkumar.k@thehindu.co.in

(This article was published on October 11, 2013)
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