MUMBAI: The Indian rupee edged higher on Wednesday on foreign fund inflows into debt and equity, though a sharper rise was capped by heavy dollar demand from importers.
Sentiment also remains supported after the Reserve Bank of India's measures on Tuesday to allow foreign investors to trade in exchange-traded currency derivatives, although the impact is not expected to be immediate.
The rupee has gained more than 4 percent so far this year on the back of foreign flows in anticipation of Narendra Modi's win in general elections last month, which helped the Indian unit to hit an 11-month high of 58.33 to the dollar on May 23.
So far foreign flows into debt markets have hit $7.74 billion this year and $8.1 billion in equities.
"Inflows are coming in debt and equity and more will come in anticipation of some good policy announcement in budget," said Mohan Shenoi, a treasurer with Kotak Mahindra Bank.
The partially convertible rupee closed at 59.33/34 per dollar after moving in a range of 59.4525-59.2000, slightly stronger than Tuesday's close of 59.3850/3950.
The one-year forward dollar premium inched up as much as 490 points in the day from Tuesday's 483.25 points.
Some traders cited dollar buying by state-run banks, possibly on behalf of the RBI in spot and forwards.
In the offshore non-deliverable forwards, the one-month contract was at 59.53 while the three-month was at 60.16.
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