Mumbai: The Indian rupee was steady on Friday, 22 June, as expectations of robust capital inflows were offset by demand for dollars from oil refiners and the prospect of central bank intervention to stem its rise, dealers said.
At 9:50am (04:20 GMT), the partially convertible rupee was at 40.71/72 a dollar, unchanged from the previous close. It has been trading in a 40.50-41.25 range since the central bank knocked it from a nine-year high of 40.28 in late May.
“The flow position looks good, the question is whether the rupee is allowed to move up once the natural resistance in the form of oil demand peters out later today,” said a dealer with a foreign bank.
The Reserve Bank of India (RBI) has been suspected of intervening to keep the rupee below 40.50 since end-May, but has been widely suspected of selling rupees every time it tests 40.70 over the past week, perhaps indicating a lower tolerance level for the local unit’s strength, dealers said.
The rupee has gained about 8.5% against the dollar this year, to be Asia’s best performing currency against the dollar, driven higher by strong foreign investment flows.
Dealers said foreign investor demand for a $2.1 billion domestic share sale by ICICI Bank had underpinned the rupee.
The relatively high yielding Indian currency has also been a favourite with carry traders, who sell low-yielding currencies like the yen in favour of high-yielding assets like the rupee.
Still, robust demand for dollars by oil refiners blocked the rupee, dealers said. Oil prices steadied above $70 a barrel as a strike continued in the world’s eighth-largest producer Nigeria.
Oil is India’s largest import.