By Swati Bhat
MUMBAI, Aug 28 (Reuters) - The Indian rupee strengthened to its highest level in nearly six months on Friday morning, helped by foreign inflows into the equity markets and amid a noticeable absence of any dollar buying by the central bank.
The partially convertible rupee INR=IN rose to a high of 73.28 per dollar, its strongest since March 5. It was trading at 73.34/35 at 0645 GMT compared to its close of 73.83 on Thursday.
"It's difficult to say if Reserve Bank of India (RBI) is totally missing today but clearly they are not defending a level any more. We could see a breach of 73 next week if we close below 73.50," a senior trader at a private bank said.
The RBI has been regularly seen buying dollars via state-run banks to prevent a sharp appreciation in the local unit which had kept the currency in a tight range.
The intervention, however, seems to have eased over this week and has triggered a rally in the rupee. Dollar inflows into the stock market and gains in other Asian peers have also aided.
Foreign portfolio investors (FPIs) have bought $6.2 billion worth of shares so far in August and the U.S. Federal Reserve's recent policy shift could further boost inflows, said traders.
The U.S. Federal Reserve on Thursday rolled out a sweeping rewrite of its approach to its role of achieving maximum employment and stable prices and promised to aim for 2% inflation on average, suggesting interest rates may stay near zero for much longer than anticipated.
The RBI is however expected to keep intervening intermittently and continue building its forex reserves, which are up $60 billion at $535.35 billion so far this fiscal year.
"We forecast a rise in foreign reserves to $567 billion by the end of FY20-21, and to $642 billion by end-FY21-22, expanding India's level of import cover," said Rahul Bajoria, an economist with Barclays.
(Reporting by Swati Bhat; Editing by Sam Holmes)
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