Rupee gains as traders look to Wall Street
THE Indian rupee shrugged off a 3% fall in local stocks to end stronger on Tuesday, with traders saying a rise in US stock futures was supportive and should encourage investors to bring some money back to India. The partially convertible rupee ended at 41.08/09 per dollar, moving up from Friday's 41.33/34, having briefly breached the 41 mark to hit a high of 40.97 during trade. Local currency markets were closed on Monday for a holiday. "Wall Street is looking good, which means the Sensex will do well tomorrow, and the rupee market already has priced that in," said a senior dealer with a private bank, referring to India's benchmark stock index. The local share index slid 3.04% to a three-month closing low on Tuesday on worries about a global credit squeeze and local political troubles over a nuclear energy deal with the United States. US stock futures rose after the Chinese central bank raised interest rates and also on hopes the Federal Reserve might take additional steps to shore up credit markets. The Chinese move saw the yen pare some earlier gains, which helped soothe nerves about further unwinding of carry trades. The rupee, which hit a nine-year high of 40.20 per dollar in July, had benefited this year from the carry trade, where investors borrow in currencies with low interest rates, such as the yen, and use the funds to invest in high-yielding currencies.