Mumbai: The Indian rupee inched up against the dollar on Thursday as traders anticipated a recovery in local equities would attract foreign fund investments, but the central bank was keenly watched for any signs of intervention.
Early morning, the partially convertible rupee was at 44.220/230 to the dollar, up from Wednesday’s close of 44.245/265.
“When shares tanked more than 450 points yesterday, nothing much happened to the rupee... so if stocks gain today, and it is looking like they will, it will have a pretty positive impact,” said a dealer at a private bank, who expects the rupee to trade in a 44.20-26 range on Thursday.
“But the RBI starts gets jittery around 44.20, and if that level breaks, we are at its mercy,” added the dealer, referring to the Reserve Bank of India that is suspected of having sold rupees regularly over the last four months in a bid to preserve exporters’ competitiveness.
Data released on Monday showed the central bank bought about $2.8 billion in January, in addition to about $5 billion in November and December.
The market widely believes the central bank has played an active role in the currency market in February too, when the rupee hovered near 44 a dollar, touching a 16-month high on 9 February.
The BSE Sensex ended 3.5% lower on Wednesday, but the market expects it will recover on Thursday, tracking Asian stocks and currencies, which firmed after a rebound on Wall Street in the previous session.
Foreign investors have moved $1.2 billion into local equities in 2007, but are net sellers of $63 million so far in March, official data showed.