The government begins selling shares in state-run miner NMDC , the country's largest iron ore producer, to raise about $3 billion in an offer from March 10 to 12.
Dealers said the market was expecting good foreign institutional buying at the NMDC follow-on share sale that opens on Tuesday. This is expected to attract dollar inflows and help the rupee.
At 10:35 a.m. (0505 GMT), the partially convertible rupee was at 45.43/44 per dollar, off a high of 45.41 but still 0.4 percent stronger than 45.6250/6350 at close on Tuesday. On Monday the rupee hit 45.38, its strongest since Jan. 12.
The local unit gained 1.1 percent last week, its best since a 1.9-percent rise in the week to Jan. 8.
'The NMDC sale opens today, good foreign interest is expected and thus the offshore rates are quite low, which is helping the spot as well,' the chief foreign exchange dealer at a large private sector bank, who did not wish to be named, said.
One-month offshore non-deliverable forward contracts were quoted at 45.37/47, marginally stronger than the onshore spot rate, suggesting a bullish near-term outlook.
'Gains in regional units and domestic shares is also helping the rupee. It should trade in a 45.35-55 range today,' a senior dealer with a foreign bank said.
The yen was firm on Wednesday on expectations of a pick up in Japanese repatriation flows before the fiscal year which ends in March, while the euro and the pound were subdued on fresh worries about Europe's fiscal health.
Most other Asian currencies were also stronger compared to the dollar.
Indian shares were trading 0.64 percent higher.
Foreign fund flows play a very crucial role in determining the direction for the local sharemarket and also for the rupee. Since the middle of February, foreigners have purchased a net $2.6 billion worth of shares.
Last year, record inflows of $17.5 billion, had helped the rupee gain 4.7 percent on year.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were both quoting at 45.5175, with the total traded volume on the two exchanges at about $1.6 billion.
(Reporting by Swati Bhat; Editing by Surojit Gupta)
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