Mumbai: The Indian rupee pulled back from early lows on Friday, tracking a drop in the dollar index, and traders watched the stock market for direction on fund flows.
At 10:40 a.m., the partially convertible rupee was at 49.25/26 per dollar, off an early low of 49.40 and little changed from 49.28/29 at close on Thursday when it rose to 49.2250 during trade, its strongest since Feb. 17.
"There is a lot of momentum in the stock market. Expectations are that foreigners would keep bringing in funds, which is helping the rupee," a senior dealer with a foreign bank said.
"But a lot would depend on the election results, only then would markets get a clear direction," he added.
The results of India's month-long national elections, which are currently underway, are due on May 16.
Indian shares were trading little changed after rallying about 50 per cent from their 2009 low in early March.
Foreign funds have bought a net $1.5 billion of local shares in April, and pumped in a further $575 million in the first three days this week, data showed.
The inflow has helped the rupee rebound nearly 6 per cent from its record low of 52.2 touched on March 3.
The dollar index, a gauge of the US unit's performance versus majors, was 0.1 per cent lower after having risen more than 0.3 per cent earlier.
One-month offshore non-deliverable forward contracts were quoting at 49.25/35, unchanged from the onshore spot rate, indicating an optimistic outlook for the rupee.
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