MUMBAI, May 5: The rupee rose to end at a new three-month high on Thursday, on continued speculation of a yuan revaluation and a rally in local stocks after India proposed scrapping a voting rights cap in private-sector banks. The rupee ended at 43.4200/ 4250 per dollar, its strongest close since Feb. 3 and 0.2 per cent firmer on the day. It inched up to 43.3850 per dollar in intra-day trade, within sight of a five-year peak of 43.30 hit in early February.

Everything in India is against the dollar. Stocks are rising, there are fresh reforms for the banking sector and the yuan revaluation talks still remain, said a dealer at a state-run bank.

Traders said talk that China would eventually revalue the yuan refused to go away, even though China’s finance minister said speculation made it hard for currency reform right now.

Speculation over a possible yuan revaluation has helped lift the rupee and other Asian currencies over the past two weeks. In overseas trade, the dollar remained weak against the euro and the yen as investors focussed on news about China and an uncertain outlook in the United States ahead of Friday’s jobs data.

The market was, however, wary of India’s central bank, which intervened aggressively earlier this year to check the rupee’s gains. But some analysts said the central bank may not be as worried about rupee strength as it was in February, as it was now focused on containing inflation pressures after raising the key short-term interest rate last week. A JP Morgan real effective exchange rate index shows the rupee is overvalued by nearly 5 per cent.

India’s government approved a proposal late on Wednesday to scrap a 10 per cent voting rights cap in private sector banks, a move which analysts said would attract more foreign investment into local banks. —Reuters