MUMBAI – The Indian rupee rose to a one-month high against the U.S. dollar Tuesday, boosted by a spate of fund inflows from overseas investors into high-yielding local debt.
The U.S. dollar was trading at 51.94 late afternoon -- below the 52-mark for the first time since Dec. 9 – against 52.50 in late Asian trade Monday.
The gains were accentuated by thin volumes, highlighting the sharp swings that have resulted from a recent central bank rule limiting speculative trades in the currency market, traders said.
Also boosting sentiment on the rupee were comments from a federal government official that Moody's had upgraded India's short-term country ceiling on foreign currency bank deposits. A Moody's analyst wasn't immediately available for comment.
The rupee was also boosted by upbeat local stocks, sparking talk of a pickup in capital inflows into equities as well.
The rupee's gains Tuesday strike a sharp contrast to its performance in 2011, when it was the worst-performing major currency in Asia, as a gaping current-account deficit and spiraling government spending sparked a wave of capital outflows from the country.
Still, traders expect the rupee's gains to be short-lived, with capital inflows likely to ease as the year progresses. Foreign investors traditionally pull funds out of the country toward the end of a calendar year and pump money back in again in the new year, they said.
