Mumbai: The rupee edged up on Thursday from a three-year low hit a day earlier, as banks unwound long-dollar positions on expectations that exporters would take advantage of the rupee's weakness to bring cash home.
By 1040 hrs IST, the partially convertible rupee had risen a little to 46.34/36 per dollar, off an early low of 46.46/48 and still within sight of the three-year low of 46.57 hit on Wednesday.
A close eye was being kept on Indian stocks, as foreign selling has played a big role in the rupee's retreat.
Gains in the dollar on renewed expectations of US interest rate increases also weighed down India's currency.
"The rupee opened weak, on the back of the dollar's gains overseas. Soon, banks were unwinding long dollars. There was support from good dollar selling by a large foreign bank," said a dealer with a foreign bank.
"We see exporters selling dollars during the day," said dealers who watched share prices to gauge whether foreign investors were still pulling money out of the market.
Foreigners have halved their net investment in Indian stocks in the past few weeks, prompting concerns of large currency flows out of the country.
Foreign funds have pulled a net $2.47 billion out of the stock market in the last 14 trading days, taking their net investment to about $2.38 billion, official figures show.
But foreign selling of equities eased significantly on Tuesday to a net $1.9 million.
Indian shares were soft again on Thursday, following a 3.6 per cent fall as they tracked weak global markets and concerns about the foreign selling.
The dollar rose on Thursday after minutes from a US Federal Reserve meeting on May 10 showed concern about inflation.
Emerging markets have seen a sell-off by foreign funds this month on concerns about high valuations, rising interest rates in major economies and volatile commodity prices.
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