Mumbai: The rupee rose on Friday as investors bought the Indian unit for its higher yields after a hefty interest rate cut by the US Federal Reserve, but concerns about central bank intervention weighed.
At 10:10 am, the partially convertible rupee was at 39.36/37 per dollar, gaining from the previous close of 39.38/39. It has hovered in a broad 39.34-39.48 band for most of the week.
“Foreign funds have been hitting the market since the Fed cut rates, and are more than offsetting the IPO-related outflows,” said a senior dealer with a foreign bank.
The Fed cut rates by a half-percentage point on Wednesday as part of an ongoing effort to halt a sharp slowdown in the world’s largest economy, a move which could attract investment flows into India.
India’s benchmark share index was trading higher in early deals, and the rupee took support from gains in most Asian equity and currency markets.
Asian stock markets rose after one of their worst months on record as concerns eased about the outlook for top bond insurers that have been hit by the US subprime mortgage crisis and credit-related losses.
The dollar hovered in range of a record low against the euro before crucial US economic data due later in the day that is expected to show just how close the US economy is to a recession.
Still, gains in the rupee were capped by outflows after refunds from the recent Reliance Power and Future Capital initial share offerings.
Concerns that the central bank would intervene against the local unit, like it is widely suspected of doing in recent months, was a deterrent to aggressively buying the local unit, dealers said.