Mumbai: The rupee moved higher on 29 June, bolstered by rising overnight call rates and the prospect of capital inflows, including those related to Sterlite Industries’ recent $1.75 billion share sale.
At 9:50am (04:20 GMT), the rupee was at 40.760/765 per dollar, strengthening from 40.83/84 the previous day. The Indian currency has been trading in a broad 40.50-41.25 range since early May.
“If the rupee starts moving up towards 40.70, we could see the RBI intervening against it,” said the dealer with a private bank, referring to the Reserve Bank of India, that is widely suspected of buying dollars as it approached the level last week.
Firm overnight interbank rates further bolstered the rupee. Call rates rose to 9-9.25% from 8-8.25% on Wednesday, 27 June, and well above last week’s near-10-year low of 0.1%.
Dealers said that inflows from Sterlite’ $1.75 billion American depositary shares issue had also started to hit the market, and that other foreign investment flows would likely bolster the rupee as well.
Sentiment for the local unit was further boosted after fellow high-yielding Asian currencies like the Indonesian rupiah and the Philippine peso rose as global risk aversion for emerging market assets eased.
Dealers said that the demand for dollars in the overseas rupee market had ebbed, suggesting that foreigner investors were regaining their appetite for the local unit.
Still, the spectre of central bank intervention weighed. The rupee touched a nine-year peak of 40.28 in late May, but was knocked back by persistent dollar buying by the central bank, dealers said.