Mumbai: The Indian rupee was largely steady on Wednesday as traders waited to see whether the central bank would let the currency rise faster to soften imported commodity prices and combat inflation.
Annual inflation spurted to a more than three-year peak of 7.41% at the end of the 2007/08 fiscal year in March and the data for early April is expected on 17 April.
At 9:51 a.m. (0421 GMT), the partially convertible rupee was at 39.9850/39.9900, a shade weaker than Tuesday’s close of 39.9625/9675.
“The dollar is showing signs of strength overseas but the rupee seems to be boxed in a 39.93-40.03 band for the day,” said U. Venkataraman, head of treasury at IDBI Bank.
Banks also tried to gauge the trend on capital inflows into the stock market, which are a key driver for the local currency. But foreigners have pulled out of Indian shares in 2008 against the backdrop of the global financial crisis.
Foreign funds have sold about $185 million so far in April, bringing their net sales to more than $3 billion (Rs11,987 crore) in 2008, helping push the rupee down 1.4%.
They bought a record $17.4 billion last year, helping the rupee appreciate more than 12% in 2007.
“We are seeing some exporter dollar-selling coming in above 40 levels on the dollar/rupee and that should keep a lid on any heavy dollar buying by oil refiners,” Venkataraman said.
India imports 70% of its crude and record high global prices increase demand for dollars and widen India’s trade deficit.
One-month offshore rupee contracts were quoted in a narrow 39.99-40.09 band.