Rupee clocks 5-month high at 52.40, still below 200 DMA

The rupee rose for a third consecutive session on Monday to hit a new five-month high as hopes for an improving economy, and fiscal and economic reforms from the government, continue to spur inflows from foreign funds, while exporters sold dollars.

Overseas investors have poured in $3.7 billion in Indian equities and debt in September, primarily driven by government action including raising subsidised diesel prices and opening up sectors to foreign direct investment.

India's current account deficit for the April-June quarter narrowed from a record 4.5 percent in the earlier quarter, turning the balance of payments into a slight surplus, data late on Friday showed.

"The rupee gained on selling from exporters and on the weak USD. It is likely to tread with gains on improved outlook of our economy," said Vikas Babu Chittiprolu, a senior foreign exchange dealer with state-run Andhra Bank.

The partially convertible rupee closed at 52.40/41 from Friday's close of 52.85/86. It rose to an intraday high of 52.40, its highest since April 23.

The rupee's gains on Monday came despite recent falls in the euro given uncertainty about whether Spain would request a bailout, although the currency recovered somewhat by European trade.

Nomura said India's narrower current account deficit highlights the "reduced hurdle for INR to perform," and said it remains long rupee with the next target at 52 to a dollar.

Technically, the rupee also seems to be on an uptrend with the USD/INR trading below its 200-day moving average of 53.17, having closed below the trendline last Thursday for the first time since August 2011.

USD/INR 1-month non-deliverable forwards were last trading at 52.65.

In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 52.79 with a total traded volume of around $4.96 billion.