MUMBAI: The Indian rupee strengthened on Tuesday as early gains in shares raised hopes for more foreign fund inflows, while the dollar's losses against major currencies and other Asian peers also boosted sentiment. But, dealers said further gains were unlikely as the stock market was holding largely steady and they expected some resistance to creep in on the back of the risk aversion globally. At 10:40 a.m. (0510 GMT), the partially convertible rupee was at 46.64/65 per dollar, stronger than its 46.80/81 close on Monday. It has moved in the 46.6350-46.70 range so far. "The rupee has gained as expected tracking the dollar index and mild equity gains, but 46.60-46.80 should be the range for the day," a senior dealer with a private bank said. Indian shares were trading up 0.4 percent, with financials leading the rise, taking cues from mostly firm Asian markets. Traders monitor share moves for cues on the direction of capital flows. So far in 2010, foreign funds have invested a net $11.6 billion in local shares, in addition to last year's record $17.5 billion investment when the rupee had risen 4.7 percent. But, due to the inconsistency of flows this year, the rupee has not appreciated much despite the inflows, dealers said. The local unit is slightly weaker on the year. The index of the dollar against six major currencies was down 0.2 percent and would be watched for cues.. The dollar slipped towards a 15-year low against the yen on Tuesday, pressured by a fall in U.S. Treasury yields as worries about the U.S. recovery and the global economy prompted investors to cut back risky positions. One-month offshore non-deliverable forward contracts were at 46.85, 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 at 46.7475, with the total traded volume on the two exchanges at about $950 million.

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