Rupee strengthens to 64.03 on hopes of additional foreign fund inflows

The rupee strengthened to 64.03 against the dollar on expectations of additional foreign portfolio inflows into Indian markets.

The domestic unit opened strong by 21 paise at 64.10 at the Interbank Foreign Exchange market today. It hovered in a range of 64.13 and 64.03 before quoting at 64.10, up 21 paise at 4.45 pm local time.

The rally came after data late on Friday showed

consumer prices rose by an annual 2.99 per cent , compared with 3.89 per cent in March, extending a debate about whether the Reserve Bank of India is being too hawkish on inflation.

Hopes for easing inflation got a further boost after the domestic weather office said on Sunday

monsoon rains had reached the country's Andaman and Nicobar islands ahead of the schedule.

The Reseve Bank of India had stunned markets in February by changing its policy stance to “neutral” from “accommodative” and issuing a statement at its last policy meeting in April that was widely seen as hawkish.

Most analysts still expect the RBI to hold rates steady this year, although the inflation data and prospects of higher-than-expected monsoon rains are fuelling calls for the central bank to cut rates. The next policy meeting is set for June 6.

According to forex dealers, a firm domestic equity market and continuous foreign capital inflows kept the rupee on a firm ground, dealers said. But the dollar’s strength against some currencies overseas halted the rupee’s march.

On Friday, the rupee had strengthened by 7 paise to end at 64.31 on sustained selling of the American currency by banks and exporters.

Meanwhile, the benchmark Sensex was trading higher by 98.2 points or 0.33 per cent at 30,286.03.