Rupee rises on higher equities, dlr weakness

By Anurag Joshi

MUMBAI (Reuters) - The rupee strengthened on Wednesday, helped by a rise in local share prices and weak overseas dollar as traders awaited a policy decision from the Federal Reserve later in the day.

The partially convertible rupee ended at 47.05/06 per dollar, off an intraday peak of 46.9750 and about 0.7 percent stronger than its previous close of 47.40/41.

"It's equity linked," said Paresh Nayar, head of foreign exchange and money markets at First Rand Bank.

Higher foreign institutional investor (FII) inflows could push up stock prices and would help rupee appreciate, he added.

India's 30-share BSE index closed 3.29 percent higher, its biggest rise in more than three-and-a-half months, on the back of the federal government's assurance that fiscal stimulus would be maintained and a world equities rally.

Foreigners have bought more than $14 billion of local equities so far this year, after being sellers of more than $13 billion in 2008. The dollar retreated from a one-month high against a basket of currencies, as traders braced for the U.S. Fed's decision, expected around 1915 GMT on Wednesday.

The Fed is expected to reaffirm its intention to keep U.S. rates at ultra-low levels for a long time to support the economy, even as signs of recovery build up.

One-month offshore non-deliverable forward contracts were quoting at 47.07/17, slightly weaker than the onshore spot rate.