MUMBAI (Reuters) – The rupee inched higher on Monday, extending its gains into a third session as a stronger start in Asian shares prompted some dollar selling as traders positioned for foreign buying of local stocks.
At 10:30 a.m. (0500 GMT), the partially convertible rupee was at 48.16/17 per dollar, 0.1 percent stronger than Friday's close of 48.22/23. The rupee gained 1.1 percent last week.
"Rupee opened stronger tracking regional cues, but stocks would be the key. We are likely to hold in a 48.10-48.25 range initially, which if broken could take the rupee to 48 and then 47.80," a senior dealer with a private bank said.
"Oil refiners are likely to come in at lower levels to meet month-end demand which will cap the gains," he added.
Crude is India's biggest import, and refiners are the largest buyers of dollars in the domestic currency market. Demand tends to be higher at month-end when importers pump up purchases to make payments for their imports.
The main share index seesawed in early trade, and was trading up 0.5 percent at 0435 GMT.
Foreign fund flows are a key driver for stocks as well as the rupee. Foreign funds have bought a net $6.6 billion of stocks so far in 2009, helping the rupee bounce off its record low of 52.2 hit in early March.
Traders said the dollar's weakness versus Asian units was also helping sentiment for the rupee.
The central bank holds its quarterly monetary policy review on Tuesday at 11:15 a.m. (0545 GMT), and analysts expect it to leave key rates unchanged.
One-month offshore non-deliverable forward contracts , were quoting at 48.16/26, little changed from the onshore spot rate, indicating near-term support.
