Mumbai: The Indian rupee edged up after some opening volatility on Friday, with dealers debating whether overseas investors would see a steep fall in the stock market as a buying opportunity or a reason to withdraw some funds.
At 9:50 am (0410 GMT), the partially convertible rupee was at 39.76/77 per dollar, a touch stronger from Thursday’s close of 39.7725/39.7800.
Last week it had hit 39.27, its strongest since March 1998.
“It’s not the easiest market to trade at the moment, there’s a lot of volatility and no clear direction, but the clear focus is on stocks,” said the chief dealer with a foreign bank.
The benchmark share index fell more than 2% in early deals, which did not augur well for the rupee, the dealer added.
The rupee slipped more than half a percent on Thursday as shares slipped nearly 4% on worries about curbs to a method foreigners could use to buy stocks.
The finance minister said in the United States on Thursday that India had no plans to impose controls on capital flows, but a recent surge of funds into the country required some measures to ward off stock market bubbles.
The rupee is still up more than 11% against the dollar this year, powered by robust overseas investment, a large portion of which has flown into the stock market.
Oil surged to a record high of $90.02. India imports about 70% of its oil and high prices could widen its trade deficit and weaken the rupee.
Still, dealers said that the rupee would take its lead mainly from equity-related flows, with other factors not as important.
“It’s only stocks that are dominating at the moment, the rest is in the distant background,” said a dealer with a private bank.