Mumbai: India's rupee rose, reversing an earlier decline, on speculation dollar supply is increasing after global funds boosted holdings of local stocks by the most since May.
Overseas funds bought $344 million more Indian shares than they sold last week, the biggest inflow since the period ended May 31, exchange data show.
The rupee has strengthened 7.3 per cent in the past five days, the biggest gain since at least 1973, as Raghuram Rajan, who took charge as governor of the Reserve Bank of India on September 4, announced steps to boost the supply of dollars.
The rupee jumped 0.8 per cent to 63.32 per dollar in Mumbai, according to prices from local banks. It fell as much as 0.6 per cent earlier. The currency touched a record low of 68.85 on August 28 and its five-day rally is the longest run of gains since October.
"A couple of banks sold dollars in the market, it looks like a capital inflow," said Agam Gupta, Mumbai-based managing director for fixed-income trading at Standard Chartered Bank.
"The currency may slowly go towards 61.50 a dollar in coming days unless the Fed tapering is bigger than market expectations."
Federal Reserve chairman Ben S. Bernanke and his colleagues will reduce Treasury purchases to $35 billion from $45 billion a month at their September 17-18 meeting, while maintaining mortgage-debt buying at $40 billion, according to the median of 34 responses in a survey of economists on September 6.
The central bank governor last week announced a plan to provide concessional swaps for banks' foreign-currency deposits to boost the supply of dollars.