Rupee steady in subdued New Year trading

MUMBAI: Rupee was little moved on Tuesday, subdued by the absence of overseas cues as most markets in Asia were shut on the first day of the New Year, though the equity market could provide direction, dealers said. At 9:40 am, the partially convertible rupee was at 39.42/43 per dollar, softening a touch from the previous close of 39.41/42.

The rupee rose 12.3 per cent against the dollar in 2007.

"We're going to trade a tight range today, most people are still in New Year mode," said a dealer with a private bank. India is one of the few markets to open on Jan 1, so inflows from offshore are expected to be limited on Tuesday.

The local benchmark equity index is trading near record levels, and buoyancy in the share market could boost the rupee, dealers said. Data showed foreign investors bought more than $17 billion of local equities in 2007, as at Dec 28, including more than $1 billion in December, buoyed by expectations the economy will grow close to 9 per cent in the fiscal year that ends in March.

Rapid gains in the rupee were unlikely though, as the central bank is widely believed to be committed to intervening to prevent sharp appreciation in the rupee. The Reserve Bank of India played an active role in 2007, buying $64.5 billion in intervention in the first 10 months of last year in a bid to temper the rupee's ascent.

A Reuters poll of 22 market participants in November forecast that robust investment flows would see the rupee strengthen further against the dollar this year, and end 2008 at 37.63.