The rupee strengthened to a 2-½ month peak on Thursday as a rise in the local share market buoyed hopes for capital inflows, with gains in other Asian currencies also underpinning sentiment. At 11 a.m. the partially convertible rupee was at 49.40/41 per dollar, off an early high of 49.2750, which was its strongest since Feb. 17. It had closed at 49.58/60 on Wednesday. "Rise in shares and Asian units is helping the rupee, but there is dollar demand coming in from importers, which is why it has come off its early highs," a senior dealer with a private bank said. The BSE Sensex rose over 1 percent in early deals, buoyed by strong Asian peers, after positive U.S. labour data and easing concerns about the health of the financial sector sparked a rally on Wall Street. Foreigners have bought $1.5 billion of local shares in April and nearly $500 million in the first two days this week, after heavy outflows in January and February. The South Korean won and Indonesian rupiah led a rally in Asian currencies on Thursday in tandem with regional equities as positive signs on the health of U.S. banks and the global economy encouraged risk-taking. "We do not expect any sharp appreciation of the rupee in the immediate near term as the uncertainty related to sustained capital flows still remain. For the month of May we see the currency trading in a broad range of 48.50 - 50.50 with significant volatility," Indranil Pan and Kaushik Das, economists at Kotak Mahindra Bank said in a note. "Going forward, for the rest of the year we could see rupee appreciating to around 46-47 if the "green shoots" of global recovery are sustained and if this in turn leads to higher capital inflows into India," they said.

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