The Indian rupee climbed in late trade on Tuesday as banks pared dollar positions in anticipation of a rise in the unit on Wednesday, when the central bank will be closed for a local holiday in Bombay and unlikely to intervene.
The rupee closed at 45.2725/2825 per dollar, above Monday's 45.2825/2875, and off an intra-day low of 45.30.
It kept to a tight range until the evening, when banks started to cut back on dollar positions.
On Wednesday, banks will be closed in several centres, including the financial hub of Bombay where the central bank is based, for the Hindu Mahashivratri festival.
But banks in centres such as New Delhi, Calcutta, and Madras, where some trading takes place, will be open.
The central bank has moderated the rupee's rise limiting it to around 0.8 percent so far this year in the face of strong trade and investment inflows into the fast growing economy.
The economic upturn has drawn foreign portfolio investments worth some $1.2 billion so far in 2004 after investments of $7.7 billion in 2003.
The one-month dollar was quoted at a discount of 0.48 percent against 0.28 percent on Monday.
The premium on the six-month dollar shrunk to 0.11 percent from 0.20 percent a day earlier.
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