The Indian rupee posted a second straight month of gains against the dollar, and the currency is seen strengthening further as the European Central Bank's latest injection of cheap funds is expected to trigger more capital inflows into emerging markets. However, surging crude oil prices and their cascading impact on inflation and growth in India, which imports about 80 percent of its oil requirements, is expected to limit the rise in the local currency, traders said.
The rupee has strengthened by 8.31 percent so far in 2012, after sliding nearly 16 percent in 2011. It ended at 49.0050/0150 to the dollar on Wednesday, up from Tuesday's close of 49.0750/0850 and taking its gains in February to 0.9 percent. It had touched 48.83 during the day - its highest since February 7, according to Thomson Reuters data.
"There are huge huge inflows into equities and debt," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank. "The only worry (for the rupee) is oil. And if this issue is removed, the rupee will fly to 46-47 levels," Raina said.
One-month offshore non-deliverable forward contracts were at 49.36. In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all ended around 49.36, on a total volume of $3.87 billion.
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