The Indian rupee on Wednesday closed at nearly two-month high of 64.98/dollar by rising 43 points. The rupee had closed at 65.41 yesterday. The rupee has been a beneficiary of broad dollar weakness after lower-than-expected jobs additions in the US fueled expectations that the Federal Reserve may delay its rate hike to next year. A rate hike by the Fed makes US government bonds attractive. This leads to inflows into dollar-based assets which strengthens the greenback. The rupee has also benefitted from renewed buying interest of Indian equities from foreign investors. So far this month they have bought Indian equities worth nearly Rs 1,500 crore (net) in cash market. This is a big turnaround after they sold over Rs 20,000 crore worth of Indian equities (net) in the previous two months. The rupee will also gain from the recent Reserve Bank's decision to allow more foreign investment into government bonds, say analysts. The RBI last month said that it would gradually increase the limits it sets for foreign investors buying government debt by up to Rs 1.2 lakh crore by March 2018. Though the rupee is down nearly 3 per cent against the dollar from the beginning of this year, it has outperformed most of its emerging peers. And the trend is likely to continue as the chances of US Fed raising interest rate in December are bleak, said domestic rating agency India Ratings.

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