Mumbai: The Indian rupee was trading strong against the US dollar on Friday, aided by optimism in the financial markets that foreigners will bring more dollar funds to the country on early signs of economic recovery. The local unit rose to 61.07 in intra-day trade, but gave up some of its early gains towards noon and was trading at 61.22 at 2pm, up 0.23%, from its previous close of 61.36. Since January this year, the rupee has weakened 10.17% and is the third worst performer in Asia after the Japanese yen and Indonesian rupiah. From its all-time low of 68.85 on 28 August, the rupee has rebounded over 11%. So far this year, foreigners have invested $13.89 billion in the Indian equity markets. Foreign inflows are crucial to finance the current account deficit, which the government is striving to contain at 3.7% of gross domestic product (GDP) in fiscal year 2014. The deficit was 4.9% of GDP in the June quarter but is likely to narrow on steps taken by the government to boost exports and cut imports. Later in the day, the government will release Index of Industrial Production (IIP) data, which will give further cues to the currency. The dollar index, which measures the US currency’s strength against major currencies, was trading at 80.349, down 0.08% from the previous close of 80.417. India’s benchmark equity index, Sensex, was at 20,482.78 points, up 1.04%, or 206.990 points, from the previous close, while the yield on India’s 10-year benchmark bond was at 8.439% against its previous close of 8.437%. On Thursday, the rupee recovered about 1.56% towards the end of the trading day following reports that Indian government is in talks with the JPMorgan Chase and Co. and others to gain entry to benchmark indexes for emerging market debt and may ease some restrictions on foreign purchases of rupee-denominated debt in the hope of attracting more dollar inflows to the country.

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