Indian Rupee Rises to Highest Since 1998 as Funds Buy Stocks

India's rupee climbed to the highest in almost a decade as overseas investors bought more local equities to benefit from the nation's record economic growth.

Funds abroad doubled their purchases of stocks this year as 26 of the 30 companies in the benchmark Bombay Stock Exchange's Sensitive Index reported quarterly profits that beat forecasts. The rupee's 12.8 percent gain this year was the second-best performance for an Asian currency after the Philippine peso.

``India's sustained growth is the most significant factor in providing confidence to investors abroad,'' said V. Rajagopal, chief currency trader at Kotak Mahindra Bank Ltd. in Mumbai. ``That should help the rupee maintain the momentum of its rise in the longer term.''

The rupee advanced 0.1 percent to 39.26 per dollar as of 9:53 a.m. in Mumbai, according to data compiled by Bloomberg. It rose to as much as 39.205, the highest since February 1998.

The economy will expand by almost 9 percent in the fiscal year ending March, Finance Minister Palaniappan Chidambaram said earlier this week. The economy grew an average of 8.6 percent since 2004, the fastest pace since independence in 1947.