Mumbai: The rupee inched up on Wednesday as the market anticipated sustained capital flows from overseas funds into local stocks this year to follow up their record purchases in 2007.
At 9:40 a.m., the partially convertible rupee was at 39.40/41 per dollar, a touch stronger than the previous close of 39.41/42. It gained 12.3% versus the dollar in 2007, to be the second-best performing Asian currency after the Philippine peso.
“We’re expecting the rupee’s strong run to continue 2008, but the central bank probably won’t let things move as fast as they did last year,” the chief dealer with foreign bank said.
Dealers said they would closely watch the benchmark share index for clues on the rupee’s near-term direction.
Data showed foreign investors bought a record $17.4 billion of local equities in 2007, including more than $1 billion in December, buoyed by expectations the economy would sustain its growth rate of around 8.5% to 9% in 2008.
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.