Mumbai: The rupee treaded water on Monday, caught between overseas investment flows after sentiment was boosted by buoyant Asian equity markets and the prospect of central bank intervention against the local unit, dealers said.
At 9:45 am, the partially convertible rupee was at 39.35/36 per dollar, unchanged from the previous finish. It hit 39.16 in November, its highest in 10 years.
“There’s good two way action this morning, and we’re likely to trade in a tight range today,” said a dealer with a foreign bank, who expects the rupee to move in a 39.36-39.30 range.
Dealers said that signs were positive for the rupee, gaining cues from China’s stock market that opened sharply higher on Monday, in response to signs that the government was finally taking action to halt a slide in share prices.
Indian shares are expected to rise on Monday, also taking cues from other Asian markets that climbed as concerns eased about the health of the US economy.
The dollar steadied against the euro on Monday, holding gains after recovering from a near-record low hit last week as a surprise rebound in the factory sector offset data showing the US economy’s first labour market contraction in 4- years.
Still, with the the Reserve Bank of India widely seen as playing an active role in limiting the rupee, dealers were circumspect about building large positions in the local unit.
The central bank bought $72.1 billion in the first 11 months of 2007 and dealers said it has been active since then in a bid to prevent the rupee from appreciating rapidly.