Rupee strengthens to over two-week high against dollar.

The Indian rupee strengthened against the dollar on Tuesday continuing its winning streak for the fourth consecutive session. At 9.31 p.m., the rupee was at 55.08 to the dollar, up 34 paise or 0.61 per cent from Monday’s close of 55.43, a level last seen on June 11.

The Rupee had strengthened on Monday on the back of dollar sales by investors, following some clarity on certain taxation rules, as also by others looking to bid at the auction for government debt limits. It was also buoyed by the surge in regional stocks after European leaders agreed to shore up the region's troubled banks, continuing its winning streak from last Friday, when it rose over 2 per cent.

Market sentiment has improved as investors seem hopeful of meaningful policy reforms at home after Prime Minister Manmohan Singh, a former Reserve Bank of India (RBI) governor, took charge of the finance ministry. According to rating agency Crisil, there is a 66 per cent chance that the rupee will appreciate to around 50 per dollar by March-end 2013.

The government released draft rules on Thursday and said the general anti avoidance rules, or GAAR, would not apply retroactively, a big concern for portfolio investors.

"I think after the clarification on GAAR and P-notes (participatory notes) there have been some inflows. Foreign banks were the major sellers today," said Uday Bhatt, a dealer with state-run UCO Bank.

"I think the near-term outlook is positive for the rupee and the unit can rise up to 54.50 in the near-term. The range for the week is expected to be 54.50 to 56," he added.

The RBI has intervened repeatedly after the currency resumed declines to record lows against the dollar, mirroring declines in May. The currency hit it’s lowest ever at 57.33 on Friday.

The rupee has earlier failed to gain traction despite measures announced by the central bank on India to bolster the currency, including raising the investment limits on government bonds for foreign investors. It had also asked oil companies to get 50 per cent of their dollar needs from state-owned banks.

The country too has been besieged with concerns over slowing growth, rising inflation and poor investor sentiment. While GDP slowed to 5.3 per cent in the fourth quarter of FY12, inflation has been persistently over comfortable levels. Credit rating agencies Fitch and S&P too warned about a paralysis in policy making affecting the country.

The domestic worries, compiled with global risk aversion on account of the Euro crisis have been weighing on the rupee, which had fallen close to 7 per cent this year, making it the worst performing currency.

Source : ndtv.com