India rupee at near 1-½ mth high on rising stocks

The Indian rupee ended at its highest in nearly 1-½ months on Thursday, as a rally in local shares raised expectations of more capital inflows and dollar weakness supported sentiment.

The partially convertible rupee ended at 46.95/96 per dollar, off an intraday high of 46.88, but still about 1.5 percent stronger than Wednesday's close of 47.67/69.

Indian shares rose 3.7 percent on Thursday to their highest close in five weeks, after inflation dropped to a nine-month low and the government sought parliament's approval for additional spending to stimulate the economy.

"The way the stock market closed on a bullish note and overseas with the dollar showing a weakness ... sentiment is clearly in favour of the rupee," Paresh Nayar, chief forex dealer at Development Credit Bank, said.

The dollar touched a 2-½ month low against the euro on Thursday and hovered near its weakest versus the yen since 1995 as investors dumped the U.S. unit after the Federal Reserve's dramatic interest rate cut this week. [USD/]

Falling oil prices also calmed concerns of a widening trade deficit. Oil CLc1, India biggest import, hovered above $40 a barrel on Thursday, around its lowest price since July 2004.