New Delhi, September 20:

The Indian rupee rose to a nine-year high against the US dollar today amid strong demand from foreign funds investing in one of the world’s fastest growing economies.

The rupee rose to 39.92 per dollar in intraday trading, breaching the psychologically crucial 40 rupees-per-dollar mark for the first time since May 1998.

The rupee has appreciated more than 10 per cent against the dollar so far this year as global investors have flocked to India, where the economy is growing about nine per cent annually and the stock market has been climbing to record highs.

Analysts expect the rupee to remain strong through this quarter, although that could hurt exporters, especially the country’s hugely profitable outsourcing industry.

“It will stay around 40 for some time,” said Agam Gupta, head of foreign exchange trading at Standard Chartered Bank in India.

The rupee’s strength has come despite measures by the Reserve Bank of India to counter a surge in foreign money into the country that also has fueled inflation.

Last month, the central bank installed several curbs on overseas borrowing by Indian companies and ordered banks to hold more cash in reserves.