Mumbai: The rupee rose to a five-and-a-half-month high on Thursday, as the government looked set to push forward with more fiscal and economic reforms, sparking a rally in stocks that is expected to attract more foreign investor inflows.
The Cabinet was due to meet on Thursday to approve bills that would raise the cap on foreign direct investment in insurance firms and open the pension sector to foreign investors.
The decisions are expected late on Thursday and will likely further boost the rupee's prospects, although it is unlikely to lead to any immediate inflows, as the moves will require approval from parliament.
The actions come after last month's "big bang" reforms, and sent Indian stocks to multi-month highs.
"Sentiment has improved from good to better which brings the focus to 51. Bids from short dollar squeeze are getting easily absorbed by fresh supplies," highlighting the "strong bullish undertone" for the rupee, said Moses Harding, head of asset liability management at IndusInd Bank.
The partially convertible rupee closed at 51.74/75, as per the State Bank of India closing rate from Wednesday's close of 52.155/165, marking a fifth successive day of gains.
It rose to an intraday high of 51.66, its highest since April 18.
Dealers have also cited dollar sales from exporters fearing further falls in the greenback against the rupee.
Traders cited, as well, rupee purchases from a large construction company and inflows of around $300 million from Indian Railway Finance Corp related to funds raised from its overseas bond issue.
USD/INR 1-month non-deliverable forwards were last trading at 52.01.
In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 51.95 with a total traded volume of around $6.8 billion.
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