Mumbai: In a tale of contrasting fortunes, the Indian rupee on Tuesday appreciated by 23 paise to end at nearly two-week high of 54.18 on dollar selling and persistent capital inflows even as stock markets closed lower.
Earlier in the day, the rupee commenced higher at 54.30 a dollar from last closing of 54.41. It then moved erratically on alternate bouts of buying and selling in a range of 54.17 and 54.40 as higher-than-expected Industrial Production (IIP) data for January was partially neutralised by rise in retail inflation for February.
The rupee finally closed near the day's high at 54.18, showing a rise of 23 paise or 0.42 percent. This is the strongest closing level for rupee since 53.86 on February 27.
Yesterday, rupee fell by 13 paise, snapping a 3-day rally.
The Indian stock market benchmark Sensex, however, saw a volatile trade today and closed further down by 81.29 points.
In signs of recovery after a 2-month decline, industrial output in January grew by 2.4 per cent on account of better performance of manufacturing and power sectors.
However, rate cut hopes were dampened after data showed retail inflation moved up for the fifth consecutive month to 10.91 percent in February.
"While IIP and retail inflation data did diminish rate cut hopes, all hope is not lost. Today, the rupee also reacted, albeit belatedly, to the positive trade data. Euro also provided support to the sentiment in favour of the local currency," said Harihar Krishnamoorthy, Treasurer, FirstRand Bank.
According to provisional bourses data, FIIs pumped in Rs 730 crore in stock markets today.
Globally, the dollar index was trading up by 0.1 percent against the basket of six major currencies on optimism that the US economy is improving.
Pramit Brahmbhatt, CEO, Alpari Financial Services said: "Rupee had a gap up opening. Dollar traded strong against most rivals today except Australian dollar and Indian rupee. Australian dollar strengthened and made 28-year high against the British pound. Local equity markets closed down by half per cent, which restricted rupee's gain."
Although IIP numbers have come out much higher than anticipated, the escalating CPI seems to have dented the positive sentiments in afternoon trade, said Abhishek Goenka, Founder and CEO, India Forex Advisors.
The focus will now be on the headline inflation figure which is due later this week, he added.
Meanwhile, the premium for the forward dollar recovered on fresh payments from banks and corporates.
The benchmark six-month forward dollar premium payable in August firmed up to 181-1/2-183 paise from previous close of 178-1/2-180 paise.
Far-forward contracts maturing in February also bounced back to 342-1/2-344-1/2 paise from 336-338 paise.
The RBI fixed the reference rate for the US dollar at 54.3365 and for euro at 70.7315.
The rupee remained firm against the pound sterling to 80.60 from Monday's close of 80.95 and also rose further to 70.50 against the euro from 70.72.
It also hardened against the Japanese yen to 56.49 per 100 yen from previous close of 56.64.