MUMBAI: The rupee strengthened on Wednesday tracking the dollar's fall against major currencies overseas and buoyed by gains in the domestic sharemarket, which may bring in some more foreign fund inflows. At 9:58 am (0428 GMT), the partially convertible rupee was at 45.43/44 per dollar, 0.3 percent above its 45.58/59 close on Monday when it had dropped to 45.6750, its lowest since March 5. Forex and debt markets were closed on Tuesday for a local holiday. "The rupee has strengthened today going by the dollar weakness overseas and is likely to hold in a 45.30-50 range during the day," said Ashtosh Raina, head of foreign exchange trading, at HDFC Bank. "The dollar may drift lower during the day while in the short term I think we can go up to 45.20," he added. The dollar index, a gauge of its strength against a basket of currencies, was down near Tuesday's one-month low of 79.632, which it had hit after the U.S. Federal Reserve meet. There was support seen at around 79.55/60 -- a low hit in mid-February. Traders were also watching the stock market for cues on the direction of capital flows. The BSE Sensex was trading 0.6 percent higher tracking world stocks, which rallied as the Fed held benchmark rates near zero and maintained its pledge to keep them low for an extended period. Foreign fund inflows into the stock market are a key driver for the rupee. Foreigners have so far in 2010 bought shares worth $2.7 billion, adding to the record inflows of $17.5 billion seen last year. One-month offshore non-deliverable forward contracts were quoted at 45.45/55, little weaker than the onshore spot rate. In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were both quoting at 45.4925, with the total traded volume on the two exchanges at about $695 million.

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