MUMBAI, Oct 4 (Reuters) - The Indian rupee closed higher
against the U.S. currency on Tuesday as a sharp decline in
Treasury yields stoked a rally in global equities and dampened
demand for the dollar.
The rupee ended at 81.52 per U.S. dollar, up from
81.8725 in the previous session. The local unit opened higher at
81.67 and reached a day's high of 81.3650.
The rupee's performance on Tuesday was broadly in line with
its Asian peers. The currency of Asia's third largest economy
would likely have fared better had it not been for oil prices.
The December Brent crude contract rose 0.7% to $89.48,
after climbing more than 4% in the previous session.
Analysts reckon that the recent choppy price action in rupee
is likely to persist as the aggressive monetary policy stance of
the U.S. Federal Reserve impacts portfolio flows and the dollar
"Since August, USDINR has been quite erratic with intra-day
price action or range limited but opening gaps (up or down)
quite large. Erratic movements may continue for the time being,"
said Anindya Banerjee, head research - forex and interest rates
at Kotak Securities.
"Sudden gap ups and gap downs make it difficult to carry
Asian equities surged and futures indicated a more than 1%
rally for U.S. shares. The fall in Treasury yields helped
engineer a turnaround in risk sentiment. The 2-year Treasury
yield declined to near 4% and the benchmark below 3.6%. Weaker
than expected U.S. manufacturing data boosted demand for bonds.
India's equity gauge, the BSE Sensex advanced 2.3%,
its best session in a month. Foreign flows into Indian equities
turned negative in the last two weeks of September. Overall,
overseas investors drew out $1.6 billion from Indian shares last
Indian equities and money markets are shut Wednesday.
(Reporting by Nimesh Vora; Editing by Dhanya Ann Thoppil)