The Indian rupee eased a touch on Friday, with the market constrained by fears of central bank intervention and the prospect of waning foreign investment flows toward the end of the year, dealers said.
At 9:40, the partially convertible rupee was at 39.40/41 per dollar, dipping from the previous close of 39.395/405. It hit 39.16 last month, its strongest since March 1998.
“There’s talk in the market that the central bank may try and push the dollar-rupee rate higher,” said a dealer with a private bank.
“If you kick a running dog, it’s bound to go further,” the dealer added, referring to possible intervention attempts by the central bank to push the local unit lower.
India’s central bank will continue to allow greater flexibility in the foreign exchange market but will also intervene to keep the rupee stable, Deputy Governor Rakesh Mohan said on Thursday.
The Reserve Bank of India bought $52 billion in intervention in the first nine months of the year and is widely seen as having played an active role in the rupee market in October and November too.
With capital inflows likely to be steady at best, no significant appreciation was likely in the near term, and the market should be content trading a range till some decisive cues spur a breakout, dealers said.
The mood was watchful after the main share index fell 1.3 percent on Thursday as fresh global credit concerns weighed, after the market climbed to a record high for a third successive day.
