Rupee eases on Asian cues, intervention fears

Rupee eases on Asian cues, intervention fears

Mumbai, 3 October The rupee slipped to its lowest in two weeks, following the lead of other Asian currencies against the dollar ahead of key USdata this week, and on concerns about central bank intervention.

At 9:40 a.m., the partially convertible rupee was at 39.860/865 per dollar, off an early low of 39.90 but still lower than Monday’s close of 39.85/86. Markets were closed on Tuesday for a holiday.

Last week the rupee rose to a peak of 39.62, its highest since April 1998.

"Rupee shorts are getting covered this morning, and if the RBI comes in it could lose some ground quickly," said a dealer with a state-run bank, referring to the Reserve Bank of India.

The Philippine peso shed half a percent and other Asian currencies also slipped as market participants halted their selling of dollars ahead of the US data.

Dealers said they would closely watch the stock market for direction on the rupee. Investment flows have been a key driver of the rupee, which has gained more than 11% this year.

The benchmark share index set a 10th record high in as many days in early trade on Wednesday. Data showed foreigners bought about $3.6 billion in the last eight trading days of September following a cut in US interest rates on 18 September.

Still, traders remained cautious about provoking the central bank, which they said had been working to stem the rupee’s rise.

The central bank spent $38.1 billion in the first seven months of 2007 to check the rupee, the most recent data shows.