Rupee Climbs On Flow Outlook; RBI Concerns Weigh

MUMBAI: The rupee moved towards a decade high on Monday, with the markets expecting equity-related capital inflows tracking gains in Asian markets, but central bank intervention is likely to limit gains, dealers said.

At 9:05 am, the partially convertible rupee at 39.34/35 per dollar, inching up from the previous finish of 39.35/36 per dollar.

It hit 39.16 in November, its highest in 10 years.

Dealers said that signs were positive for the rupee, gaining cues from China's stock market that opened sharply higher on Monday, in response to signs that the government was finally taking action to halt a slide in share prices.

Still, with the the Reserve Bank of India widely seen as playing an active role in limiting the rupee, dealers were circumspect about building large positions in the local unit.

Rupee off early high on cbank, stocks key

MUMBAI: The rupee was knocked down on Wednesday by central bank intervention, dealers said after it had initially rallied in expectation of more capital inflows after aggressive interest rate cuts by the U.S. Federal Reserve.

At 9:53 a.m. (0423 GMT), the partially convertible rupee had softened to 39.53/54 per dollar from Tuesday's close of 39.48/49, well below a high of 39.40 hit in opening deals. "They came in aggressively minutes after the markets opened, and have bought heavily since then," said a Mumbai-based dealer.

A surprise 75 basis point inter-meeting rate cut by the Fed has widened the interest rate differential between India and the U.S to 4.25 percent, which could attracting more capital inflows.

Capital inflows were a key driver of the rupee's 12 percent rise in 2007, when foreigners bought a record $17.4 billion of stocks. The rupee hit a near-decade high of 39.16 hit in November. But foreigners have turned sellers over the past week as the sharemarket has fallen sharply, removing a key support for the rupee. Data shows they sold more than $2 billion worth of shares in the four trading days to Monday and provisional data from the National Stock Exchange showed foreign funds sold $1.08 billion of shares on Tuesday.

India's benchmark share index <.BSESN> ended down 5 percent on Tuesday, its lowest close since Sept. 21 and 21 percent below a record high hit on Jan. 10. Buoyed by the U.S. rate cuts and gains in Asian markets, the market was up more than 4 percent in early deals on Tuesday. The Reserve Bank of India bought $72.13 billion in the first 11 months of 2007, and traders said it has been active buyer since then to check the rupee.

Adding to the pressure on the rupee, importers were expected to be dollar buyers in coming days. "Dollar demand will remain strong as we head into the month-end from oil refiners and other importers," U. Venkataraman, head of treasury at IDBI Bank said.