MUMBAI, May 12: The Indian rupee rose on Friday from a two-week low hit in the previous session, aided by a dollar fall to a one-year low against the euro and an 8-month low against the yen.

Dealers said however local demand for dollars throughout the day had kept a lid on further rupee gains.

There was pretty good demand for dollars, particularly from oil companies. Foreign funds were also buying, a dealer with a foreign bank said.

The partially convertible rupee ended at 45.04/05 per dollar, above the previous day’s close at 45.0850/0950, a two-week low.

Data released by India’s stock market regulator showed foreign funds sold a net $266.8 million on Thursday, which traders said helped explain good demand for the US currency in the previous session.

Indian shares fell for a second straight day on Friday, pulled down by a drop in shares of cement makers.

I don’t think the stock market downturn will continue and I expect the demand from foreign funds to come down on Monday, said a dealer with a state-run bank.

Strong inflows into India’s stock market have been supporting the rupee since the beginning of 2006 and the central bank has bought dollars in recent weeks to keep exports competitive.

Foreign funds have invested nearly $4.6 billion in the record-breaking stock market since the start of the year.

The dollar was trading at $1.2900 per euro at 1250 GMT, just above its one-year low of about $1.2956. It has been under downward pressure in recent weeks as the market focuses on the large US trade deficit and concerns about global imbalances.—Reuters