The Indian rupee strengthened for a third successive session on 25 February, its biggest winning streak in two months, supported by US dollar inflows into an offshore bond sale and marginal gains in the domestic equities market.
The partially convertible rupee closed at 61.9350/9450 to the US dollar compared to 62.07/08 on 24 February. The unit logged its best winning streak since 24 December, 2013.
Indian Railway Finance (IRFC) raised $500m (£300m, €363m) through offshore bonds, with the issue garnering a strong order book of over $3bn, according to International Financing Review.
Meanwhile, shares also gained for a third straight session and finished at a one-month high as software stocks rose on optimism about US business outlook. The benchmark S&P BSE Sensex finished 0.20% higher at 20,852.47 points.
Some traders said dollar inflows into the domestic stock markets also helped the rupee. Foreigners have bought a net $465m over the last eight successive trading sessions.
Traders said US dollar inflows have continued, though in small quantities, helping thwart any falls in the local currency despite dollar demand from importers coming in at sub-62 rupee levels.
In the offshore non-deliverable forwards, the one-month contract was at 62.23 while the three-month was at 62.99.
Traders also said gains in other Asian currencies versus the greenback also bolstered sentiment.
Most emerging Asian currencies logged marginal gains on 25 February. The South Korean won and the Malaysian ringgit rose on exporter demand, while a weakening yuan and falling Chinese equities limited gains in regional units.
"Market has been very boring, not much movement in the forwards also. But some flows were seen which helped the rupee nudge higher," said Hari Chandramgethen, head of foreign exchange trading at South Indian Bank.
"We could see some movement towards the end of the week as there will be month-end selling from exporters and the import demand. There is both domestic and US GDP data on [28 February] evening as well. Until the data, 61.70 to 62.50 range should hold," Chandramgethen told Reuters.
Societe Generale Cross Asset Research said in a note to clients: "The Chinese yuan continued to weaken overnight with the CNY trading lower than fixing for the first time since Sept 2012 on speculation the PBoC wants to end the currency's steady appreciation to ward off speculators before possible widening of trading band.
"The spill over to currencies and global risk assets has so far been minimal though the Shanghai composite dropped another 2% overnight, extending losses to 5% since [20 February]. Our economists look for the yuan depreciation to halt when short-term capital inflows abate."
RBI Rate Hike
India's central bank announced a surprise interest rate increase in January, in a bid to rein in inflation and defend the rupee from the volatility that affected emerging markets earlier in the year.
The Reserve Bank of India (RBI) raised its benchmark interest rate to 8% from 7.75%.