The Indian rupee ended at a fresh five-month closing high on Tuesday, helped by robust capital and trade inflows that had bunched up over a four-day weekend, but it was pulled off a session peak by central bank intervention. The rupee closed at 45.0675/0750 per dollar, nearly 0.20 percent stronger than Thursday's previous five-month closing peak of 45.1500/1600 but off an intra-day peak of 44.9900. The local currency last closed firmer at 44.9800/9850 on June 9.
"But for the sustained buying (of dollars) by state-run banks acting for the central bank from the 45 level onwards, the story for the day was one of all-round selling," a dealer at a state-run bank said.
"With oil prices having softened significantly and the dollar struggling overseas, we should see a test of 45 again tomorrow, though the RBI (Reserve Bank of India) will most probably support that level again."
The Indian central bank follows a policy of allowing the market to determine the exchange rate of the partially convertible rupee but intervenes often to contain volatility.
Dollar inflows from overseas portfolio investors and exporters were strong on Tuesday, as trade resumed after holidays on Friday and Monday for the major Hindu and Muslim festivals of Diwali and Eid.
The rupee has now appreciated 3.1 percent from the year's low of 46.4500/4550 recorded on July 29, helped by a strong revival in foreign fund investments into Asia's fourth-largest economy, after a lull that followed a change of government in May.
The Indian stock market has rallied to nine-month highs. Foreign investors keen to capitalise on the run-up have pumped in nearly $1.3 billion into Indian shares since end September.
Rupee premiums on forward dollars also eased tracking the spot rupee's strong gains. The annualised premium on the six-month dollar eased 26 basis points to a 2.04 percent close.
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