Rupee posts biggest single-day rise in 10 yrs

Hopes that cuts in bank lending rates would help credit flow more freely and ease a cash squeeze also boosted the sentiment.

Foreign funds were buyers in Indian market in the last two days. They have sold a net 12.6 billion worth of Indian shares so far in 2008, helping push the rupee down more than 17 per cent. They bought a record 17.4 billion in 2007, when the rupee rose 12.3 per cent.

The unwinding of long dollar positions based on the non-deliverable forward rates resulted in large stops being triggered, which led to the all-round dollar selling, the chief dealer with a state-run bank said. Closing below 47.75 looks bullish for the rupee, it may strengthen beyond 47 per dollar if it holds near these levels on Wednesday, he added. One-month offshore non-deliverable forward contracts were quoting at 48.02/22 per dollar, weaker than the onshore spot rate, but much stronger from 51-52 levels seen last week, indicating some improvement in rupee sentiment.