Mumbai: The rupee firmed on Monday on hopes the central bank may allow the rupee to gain to rein in inflation driven by high global commodities prices, but dollar buying by oil refiners limited the rise.
At 10:14 a.m., the partially convertible rupee was at 39.93/94 per dollar, a shade above Friday’s close of 39.95/96 and below an early high of 39.89.
“There has been some oil buying coming in around 39.90 levels and that is keeping the rupee in a range,” said a trader at a state-run bank.
Traders also said there might be some dollar buying by large state-run banks on behalf of the central bank to curb an outsized appreciation of the rupee.
Weekly data on Friday showed annual inflation hit 7.0% on 22 March, its highest reading since December 2004 and much higher than the central bank’s comfort zone of 5% and above analysts’ expectations of 6.62%.
The rupee’s gains were also buoyed by firmer regional currencies after weak US jobs data raised expectations of deeper interest rate cuts in the world’s biggest economy.
Traders were also watching the stock market, which started higher then slipped into negative territory before pulling higher again.
Capital inflows are a key driver for the rupee. Foreigners have sold more than $430 million of stocks so far this month bringing their net sales in 2008 to more than $3.4 billion, after buying a record $17.4 billion in 2007.