Mumbai: The Indian currency made a late recovery to close a little bit stronger on yesterday as tension about the possibility of untimely elections alleviated and a zooming stock market brought up anticipations of huge foreign inflows.

The partially convertible rupee ended at 39.44/45 per dollar, rising from a low of 39.56, and a shade higher than its last day’s closure of 39.455/460.

Last week, the rupee hit a record high of 39.36 last week, which was its strongest since March 1998.

A senior trader with a private bank said, “There were good dollar demand in the offshore rupee market in the morning on account of the political uncertainty, but once stocks started rising, overseas investors were attracted again.”

The Sensex closed 4.5 per cent higher on Tuesday, after hitting its attaining its highest peak in last 16 months.

Investor response was cheerful after the administration and its communistic partners decided agreed to assemble again afterward this month to answer a row over a nuclear agreement eal with the United States that threatens to spark a early general election.

An early election could lead to a slowing of reforms or increased government spending.

The Indian currency has risen over 12 per cent up till now in the existing fiscal, powered by capital inflows into securities market.

In the first three sittings of this month, outsiders (foreigners) have bought about $1.5 billion of local stocks, which is about 1/10th of their net purchases in 2007.

Traders told that the RBI was sporadically seen buying dollars through the day in a bid to restrict the rupee’s rise.

International ratings agency Standard and Poor has projected the rupee’s increase to be controlled by the Reserve Bank of India (RBI).

In a declaration, Subir Gokarn, S&P’s chief economist for Asia Pacific said, “We expect the Reserve Bank of India to resist appreciation beyond current levels and the rupee will end the year at around 40.50 per dollar.”