MUMBAI: The Indian rupee climbed on Friday after a two-day holiday, supported by firmer shares and expectations for another rate rise by the central bank this month to curb inflation pressures. At 11:02 a.m. (0532 GMT), the partially convertible rupee was at 45.8850/45.8875 per dollar, 0.4 stronger than Tuesday's close of 46.085/095, after touching a high of 45.8675 in early trades. "One factor is positive equities, but the most important being expectation of rate hike after the GDP data, which is pushing the rupee up," a trader with a state-run bank said. India's economy grew at its weakest pace in six quarters but outperformed even gloomier predictions, reinforcing expectations the central bank will keep raising interest rates to put a lid on inflation. The food price index rose 10.05 per cent, its highest in nearly six months, and the fuel price index climbed 12.55 per cent in the year to Aug. 20, government data on Thursday showed. The primary articles index was up 12.93 per cent, compared with an annual rise of 12.40 per cent a week earlier. The central bank, which has raised rates 11 times since March 2010, is expected to increase rates again when it reviews policy on Sept. 16. Traders said the higher rate differential should attract more foreign funds looking for better returns. The main stock index was trading up more than 1 per cent on improving foreign fund demand for beaten-down shares. Traders forecast a 45.80-46.00 band for the rupee, with activity muted ahead of the weekend. "There won't be big trading today. The market will move based on the flows," a dealer with another state-run bank said. The euro found a steadier footing in Asia on Friday, having suffered a drubbing overnight on weak euro zone data, as market attention turned to a closely watched US employment report. The index of the dollar against six major currencies was at 74.510 points, above 74.129 at the close of local trade on Tuesday. The euro was at $1.4260, lower than $1.4399 at the close of domestic trade on Tuesday. The one-month onshore forward premium was at 8.25 points from 7 on Tuesday, the three-month was at 34 points from 31.75 and the one-year stood at 131 points from 126. The one-month offshore non-deliverable forward contracts were quoted at 45.98, weaker than the onshore spot rate. 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 were all at 45.9550. The total volume was at $1.44 billion.

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