Mumbai: The Indian rupee looked poised to test a 9-year high early on 8 October as investors bought it in anticipation of more capital inflows, but suspected central bank intervention blocked its path, dealers said.
The rupee rose to a high of 39.38 per dollar, just shy of last week’s peak of 39.26, which was its strongest since March 1998. At 10 a.m., the rupee was at 39.43/44 per dollar, stronger than finish of 39.48/49 on 5 October.
“There was some good dollar selling in the morning, and it seemed that we might hit a fresh peak, but the central bank came in earlier than normal and absorbed the flows,” said a dealer with a state-run bank. The dealer expected the rupee to trade in a 39.35-39.50 range on 8 October.
The rupee has been boosted by foreign investment in the stock market. Foreigners bought a net $1.45 billion worth of local equities in the first three trading days of October, about 1/10th of their total net purchases for 2007.
Dealers expected the fast-rising stock market to attract more offshore investment, though volumes were likely to be muted on account of holidays in Japan and the United States on 8 October.
The rupee was further bolstered as the dollar resumed its downtrend on 8 October, after a solid U.S. jobs report failed to significantly reduce expectations for a another cut in U.S. interest rates this year. Still, with the Reserve Bank of India being widely seen as playing an active role to temper the rupee’s rise, any ascent would be gradual from now on, dealers said.
The central bank bought $38.1 billion in the first seven months of 2007 in a bid to cap the rupee, the latest data shows.