Indian rupee ends steady at five-month highs

The Indian rupee ended steady around five-month highs on Tuesday, with corporates stepping up dollar purchases and traders wary about increased central bank intervention to curb sharp gains by the local currency. Underlying sentiment was positive, helped by robust foreign fund inflows, a broadly weak dollar and on increased speculation about a revaluation of the Chinese yuan.
The rupee ended at 45.1700/1775 per dollar, off an intra-day high of 45.08 and barely changed from its previous close of 45.1700/1800 - the strongest since June 11, when it ended at 45.1550/1650.
"There was some corporate dollar buying and possibly purchases by foreign funds to make remittances," said a dealer at a state-run bank. "But with regional currencies showing an appreciating bias, more gains are likely in store for the rupee."
But traders were wary of intervention by the Reserve Bank of India.
The Indian central bank bid aggressively for dollars on Monday to curb sharp gains by the rupee, which touched 44.87 per dollar - its highest since May - before giving up most of the gains to end at a new five-month high.
The rupee is now up nearly one percent so far this calendar year, rebounding from a 6.3 percent slump between April and July, when foreign investment inflows had slowed after a left-backed government took office in New Delhi and the US Federal Reserve started to raise interest rates.
Investments from foreign funds have since revived as investors bet on robust economic growth. Foreign funds have bought nearly $6 billion worth of Indian shares so far this year, after a record $6.7 billion in the whole of 2003.
India's central bank often intervenes in the foreign exchange market through state-run banks to curb sharp swings. Monday's intervention by the central bank would lead to a slight easing in rupee liquidity in the next few days.
Premiums on the forward dollar eased on a firm outlook for the local currency and as exporters stepped in to encash receivables. The six-month forward ended at an annualised 2.26 percent, down from the previous close of 2.68 percent.