Mumbai: The Indian rupee inched up on Monday, buoyed by a view that steady overseas investment flows would bolster the local unit, though the prospect of central bank intervention weighed.
At 9:45 a.m. (0410 GMT), the partially convertible rupee was at 39.61/62, a tad higher than the previous close of 39.62/63.
It strengthened to 39.16 last month, its highest since March 1998, but had since weakened under pressure from suspected central bank intervention and foreign selling of local stocks.
“There is a bit of caution at the moment on account of the recent volatility, but the general consensus is that the rupee is going to gradually appreciate,” said the chief dealer with a foreign bank.
“Even with the capital outflows from stocks, central bank intervention and month-end dollar demand from oil companies, the rupee did not weaken past 39.80,” the dealer added.
Dealers will closely watch the benchmark share index for short-term cues on the direction of the currency, but sentiment was generally buoyant after shares ended up 1.9% on Friday.
Foreign buying of local shares has been a key driver of the rupee, helping it appreciate about 11.5% against the dollar this year, to be among Asia’s best performing currencies.
The dollar dipped against the euro and yen on Monday as market players took profits on last week’s gains scored on hopes Federal Reserve moves would help the economy and market recover.