Mumbai: The Indian rupee paused after climbing in early deals on Thursday, caught between capital inflows into a rising stock market and signs the central bank was intervening to cap gains, dealers said.
At 10:05 a.m. (0435 GMT), the partially convertible rupee was at 39.935/945 per dollar, off an early high of 39.92 but stronger than the close of 39.96/97 on 16 April.
“Early we saw some inflows into the stock market and some corporates selling dollars,” said a trader with a private bank.
“But now we have (state) banks, probably acting on behalf of Reserve Bank of India, coming in and buying dollars, so that’s keeping it in a range,” he said.
India’s main share index opened 1.3% higher on 16 April, tracking other Asian markets.
Data due at noon (0630 GMT) is expected to show annual inflation rate eased slightly to 7.19% in early April from a three-year high of 7.41% in late March.
Traders said this data was unlikely to affect the rupee, although there are some expectations the central bank could allow it to appreciate to soften the price of imported commodities.
“If the inflation data does indeed come down from last week’s high, this could have a positive impact on stocks. But I don’t think it will have any major impact on the rupee at all,” the trader said.
Analysts widely expect the central bank to tighten policy by increasing banks’ reserve requirements at its April 29 policy review, rather than increasing interest rates.
The central bank has also been issuing market stabilisation scheme bonds to soak up cash generated by its intervention to curb the rupee’s rise. The central bank bought $17.5 billion in intervention in January and February.