Re strengthens to more than 1-week high

The rupee strengthened to its highest level in over a week on Monday, boosted by dollar sales by custodian banks, positive sentiment ahead of the upcoming budget and heavy dollar selling in the non-deliverable forwards market.

Investors are increasingly hopeful the government will, in its budget on Thursday, announce measures to attract more foreign fund flows into the country. Net inflows into the country's equity market have been a key determinant of the rupee's fortunes in recent years. Foreigners have so far this year bought $8.4 billion worth of local shares after purchasing $24.55 billion in 2012.

The partially convertible unit closed at 53.8650/8750 per dollar, after touching 53.86, its strongest since February 15. The unit had closed at 54.1750/1850 on Friday.

Traders said gains in the domestic sharemarket also helped the rupee. However, continued dollar demand from oil refiners, the largest buyers of dollars in the domestic currency market, to meet month-end import commitments limited further gains in the rupee.

NDFs have been seeing heavy dollar selling pushing the $/Rs down. But good demand from oil limited a further downside," a senior dealer said.