MUMBAI: The Indian rupee edged higher on Wednesday, a day after sliding to an eight-month low, as shares rose more than 1 percent and gains in regional peers helped bolster sentiment. At 9:50 a.m. (0420 GMT), the partially convertible rupee was at 47.37/38 per dollar, 0.7 percent stronger than 47.71/72 at close on Tuesday when it had dropped during trade to 47.75, its weakest since Oct 1, 2009. "The positive sentiment from equities is rubbing on the rupee as well," a senior dealer with a foreign bank said. "We could see some inflows from the 3G sale but not sure how large, but generally the sentiment is good today. The euro's moves will be crucial." Dealers predicted a range of 47.20-47.50 during the session. Last week, the rupee fell 3.8 percent in its biggest weekly drop since an 11.7 percent dive in mid-July 1996. So far this week, the unit is down about 0.9 percent. Indian shares rose more than 1.3 percent, tracking gains in Asian peers and Wall Street, after sliding to the lowest close in 3-½ months in the previous session. Foreign institutional investors have withdrawn nearly $2 billion from Indian stocks so far in May, reducing net inflows in 2010 to $4.6 billion. The withdrawals were a key factor for the rupee's 6.35 percent fall this month. The euro fell on Wednesday, slipping back towards a four-year low against the dollar and an 8-1/2-year trough against the yen as concerns about the health of the euro zone's banking sector weigh on the single currency. Gains in other Asian peers also helped the rupee. The index of the dollar against six major currencies was largely flat and would be watched for direction, traders said. Dealers expect some inflows later in the day towards the 3G spectrum sale and said it could push the rupee up towards 47.20. However, month-end dollar demand may limit sharper gains beyond that point, they added. The 3G spectrum auction, which concluded last Wednesday, yielded the Indian government 677 billion rupees ($14.3 billion), nearly twice its expectations. The government has asked firms which have won the spectrum to pay up by May 31. Oil is India's biggest import and refiners are the largest buyers of dollars in the local currency market. Demand for dollars tends to peak at the end of each month, when importers are required to make the payments. One-month offshore non-deliverable forward contracts were at 47.60, 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 47.54, with the total traded volume on the two exchanges at about $785 million.

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