Rupee caps gains after early surge

Mumbai: The Indian rupee strengthened on Monday as solid gains in the domestic share market renewed hopes for fresh capital inflows, but dollar demand from importers and oil firms capped gains.

The partially convertible rupee closed at 47.35/37 per dollar, 0.6 per cent stronger than Friday's close of 47.65/66. The rupee has recovered 6.2 per cent from its record low of 50.29 hit in late October, but is still down 16.8 per cent on the year.

"The market was rangebound, there were importers at the lower-end and exporters at the higher-end," said Agam Gupta, head of forex trading at Standard Chartered Bank. "Foreign institutional investors were there on both sides."

Dealers said the central bank's latest move to provide dollar liquidity to banks would help ease pressure on the local unit.

On Friday, the central bank offered to provide foreign exchange liquidity to overseas branches of Indian banks via foreign exchange swaps.

One-month offshore non-deliverable forward contracts were quoting at 47.80/95, weaker than the onshore spot rate.