Mumbai: The Indian rupee hovered near an 18-month high against the dollar on Tuesday as buoyant Asian markets lifted sentiment, but traders were wary the central bank would block the rupee’s path as it approached the 44 mark.
At 9:35 am local time, the partially convertible rupee was at Rs44.067/072 per dollar, rising from Friday’s Rs44.11/12. The rupee market was shut on Monday for a holiday.
“Asia is up ... most of the the indices are in the plus, and the stock market should follow — there’s a good chance the rupee will test 44 today,” said a dealer at a private bank, who expects the rupee to trade in a Rs44.03 to Rs44.13 range on Tuesday.
“It all depends on what levels the RBI is comfortable with,” the dealer said.
The rupee last breached the 44 mark in late September 2005. It tested Rs44.03 per dollar last month before suspected central bank intervention thwarted its rise.
The Reserve Bank of India is suspected of selling the rupee to cap its gains and protect export competitiveness. Data shows the central bank has purchased close to $8 billion (Rs35,216 crore) in the three months to January, and traders widely believe it has played an active role in capping the rupee in February too.
On Tuesday, the rupee gained support as most Asian currencies held firm against the dollar as rallying global equity markets reflected greater investor appetite for risk.
Foreign funds have poured in about $1.1 billion into Indian equities in 2007, which has helped power the rupee’s gains.
The rupee has strengthened by about 6.5% since hitting a 3-year trough last July, and it is thought the central bank is uneasy with the pace of the Indian unit’s appreciation.