Mumbai: The rupee slipped on Thursday as investors worried the momentum that took it to nine-year highs this week may be fading, but losses were limited as the dollar held near a record low against the euro.
Concerns of central bank intervention may also keep the rupee from testing Tuesday’s high of 41.62 per dollar, traders said.
At 10:45 am local time, the rupee was at 42.160/185 per dollar, softening from Wednesday’s close of 42.05/07.
“After the rupee’s rally earlier this week, the market’s going through a bit of a correction, but nothing serious,” said the chief dealer at a private bank.
The rupee is up 3% this month and is trading nearly 12% above a three-year low of 47.04 hit last July, bolstered by strong capital inflows into Asia’s fourth-largest economy.
The Reserve Bank of India (RBI) is thought to have eased back on intervention to curb rupee gains in the past few weeks but traders say it may now be uncomfortable with the pace of appreciation, as a stronger local currency dents exporters’ competitiveness.
The RBI bought a record $11.9 billion (Rs50,134 crore) in February in a bid to stem the rupee’s rise. It bought $19.7 billion in the four months to the end of February.
UBS cautioned the central bank was waiting for a clearer economic picture, and dollar-buying intervention would resume if money supply growth and inflation eased.
“We would therefore not be surprised if the RBI returns to the rupee market before the week is up,” UBS said in a note.