Capital inflows, freer yuan see rupee post fresh gains

The rupee gained 58 paise to 45.58 a dollar in early trade today on the back of fresh capital inflows by foreign funds into equities. The rupee also tracked gains in other Asian currencies after the Chinese central bank decided to scrap a two-year peg to the US dollar for its currency to avoid criticism at the G20 summit in Toronto this week.

The dollar weakening against other major Asian currencies supported the rupee, dealers said.

The domestic currency had closed 14 paise higher at 46.16/17 in the previous session.

Dealers said the rupee strengthened against the US currency largely because of fresh capital inflows by foreign funds into equities.

The partially-convertible currency appreciated for a fourth consecutive session, the longest winning streak since March, after the People's Bank of China (PBOC) said on June 19 that it will let yuan move more freely.

The rupee also received a fillip from strong gains in the local stock market.

India's stocks rose to a two-month high on speculation that the Government's move to bring ULIPs under IRDA's purview will boost local investments into equities. China's move to adopt a more flexible currency management policy also helped bolster the mood.

At 11:38 am, the Bombay Stock Exchange (BSE) Sensex was at 17,905, up 335 points or 1.9 per cent. It was headed for its highest close since April 12. The S&P CNX Nifty Index on the National Stock Exchange (NSE) also rose by 1.9 per cent to 5,361.