Rupee completes 3 day rally vs. US Dollar

Completing a three-day winning streak, the rupee today hardened by another 19 paise to close at 40.89/90 against the US dollar following a smart rally in equity markets and expectations of revival of capital inflows.
In active trade at the Interbank Foreign Exchange (forex) market, the domestic unit opened slightly better at 41.06/08 a dollar from yesterday's close of 41.08/09 per dollar.
Later, it improved further on firm trend in share markets all over Asia and finally settled the day sharply higher at 40.89/90 a dollar.
Though the Foreign Institutional Investors (FIIs) remained net sellers to the tune of nearly USD 2.0 billion in the current month so far, smart recovery in share values across the globe, including India, helped the rupee rally.
The benchmark Sensex was up by nearly 260 points today.
Dealers expected more capital inflows in the near-term and all eyes are set on the US Federal Resere's indication to cut the benchmark interest rate to bring stability in the credit as well as equity markets.
The Indian rupee inched up on Wednesday as gains in Asian stocks raised hopes of overseas investment flows into local equities, though traders remained cautious about the fallout from U.S. credit market turbulence.
At 9:40 a.m. IST, the partially convertible rupee was at 41.07/08 per dollar, strengthening from Tuesday's 41.08/09.
"There was some good dollar selling this morning, which may mean that investors are returning to the rupee," said the chief dealer with a foreign bank, who expects the rupee to trade in a 41.15-40.95 range on Wednesday.
Most Asian stocks rose, lifted by hopes of a U.S. interest rate cut to calm turbulent markets.
Local dealers said they would watch the stock market closely for direction on the rupee, after the benchmark index fell 3 percent in the previous session on local political troubles.
India's ruling coalition faces a threat from its communist allies who are against pursuing a nuclear energy deal with the Unites States.
Foreign investments into local equities have been a key driver of the rupee's strength this year, helping it gain nearly 8 percent to be Asia's best performing currency against the dollar.
Foreign funds have sold more than $2 billion this month, which has caused the rupee to slip from its nine-year peak of 40.20 hit in July.
Exporters also sold dollars, expecting further fall in dollar value in near future.
In three-day gaining streak, the rupee shot up by about 55 paise since August 17.
According to a senior government official, the recent fall in rupee value was only temporary due to curbs on external commercial borrowings and other measures, it could again appreciate to touch a level of 38-39 to a dollar, if FIIs continue to net purchase in Indian Capital Markets
Rupee / US Dollar Forex Currency News, Gold in India, and The Sensex index on the Bombay Stock Exchange (BSE). Euro / Rupee and Yen / Rupee.The Indian rupee inched up on Wednesday as gains in Asian stocks raised hopes of overseas investment flows into local equities, though traders remained cautious about the fallout from U.S. credit market turbulence.
At 9:40 a.m. IST, the partially convertible rupee was at 41.07/08 per dollar, strengthening from Tuesday's 41.08/09.
GOLD - Indian Rupee - US Dollar - Forex
"There was some good dollar selling this morning, which may mean that investors are returning to the rupee," said the chief dealer with a foreign bank, who expects the rupee to trade in a 41.15-40.95 range on Wednesday.
Most Asian stocks rose, lifted by hopes of a U.S. interest rate cut to calm turbulent markets.
Local dealers said they would watch the stock market closely for direction on the rupee, after the benchmark index fell 3 percent in the previous session on local political troubles.
India's ruling coalition faces a threat from its communist allies who are against pursuing a nuclear energy deal with the Unites States.
Indian gold futures were down on Wednesday tracking overseas falls and a slightly stronger rupee, but commodity brokerages said investors were still anxious about the global credit market problems.
"There is no momentum in the market," said T. Gnanasekar, director at Commtrendz Research. "Gold is trying to consolidate."
Gnanasekar said technically gold looked weak, specially as the foreign spot gold, the primary guide for local prices, had fallen to its 200-day moving average level.
Another analyst, Shailendra Kumar, head of research at Sharekhan Commodities Pvt. Ltd., said gold prices are likely to see little movement during the day.
Kumar said the October contract on the Multi Commodity Exchange of India Ltd. (MCX) could face resistance at 8,840 rupees per 10 grams.
The open interest of October gold on MCX was at 8,208 lots, up from 8,110 the previous day. Volume on Tuesday was at 15.78
Foreign investments into local equities have been a key driver of the rupee's strength this year, helping it gain nearly 8 percent to be Asia's best performing currency against the dollar.
Foreign funds have sold more than $2 billion this month, which has caused the rupee to slip from its nine-year peak of 40.20 hit in July.
The Bombay Stock Exchange benchmark Sensex partly made up for the previous session's losses, rising 260 points today on emergence of buying by funds amid firm Asian markets and gains in US stocks.
The market remained volatile on aggressive bouts of buying and selling, which took the index to a high of 14,281 and low of 13,870 points during the day.
The Sensex, which had tumbled 438 points yesterday on political concerns, gained 259.55 points to close at 14,248.66 as buying interest revived in fundamentally strong stocks led by shares in capital goods, metal and oil and gas sectors.
Similarly, the wide-based National Stock Exchange's Nifty gained 78.25 points at 4,153.15 after touching a high of 4,165.70. The Nifty had fallen to 4,040.15 in morning deals.
The market gained as Asian stocks rose on the back of fourth day of gains in US stocks yesterday, while discounting the political crisis brought about by the Indo-US nuclear deal at home.
As the market turned bullish, capital goods segment index spurted the most by 407.53 points at 12,397.50 followed by metal index by 234.18 points at 10,081.33. Oil and gas index shot up by 103.31 points at 7,511.33 and PSU index by 81.97 points at 6,573.94.
Bank index rose by 63.62 points at 7,387.92, Teck index by 63.16 points at 3,421.97, IT index by 53.67 points at 4348.53 and FMCG index by 42.85 points at 1,841.90.
However, realty, healthcare, consumer durables and auto sector stocks remained weak.