The Indian rupee rose against the dollar on Friday, bolstered by expectations of continued firm foreign demand for local shares, but gains were capped by suspected intervention by the central bank.
Dealers said state banks were seen buying dollars in the 44.34/35 area and this was probably on behalf of the Reserve Bank of India (RBI).
But some traders added demand for dollars from state banks may also have been related to funding oil imports.
"Nationalised banks have been very much in the market and this was probably for the RBI," said a trader at a foreign bank in Mumbai. "There is also oil demand today, so the demand for dollars may have come from there."
The rupee closed at 44.33/34 per dollar, up 0.09 percent from Thursday's close and up 0.21 percent on the week.
The central bank has been suspected of intervening via state banks in the past two days to cap rupee strength and reduce volatility.
The cap in foreign investment in government bonds was raised to $2 billion from $1.75 billion and the corporate debt limit was trebled to $1.5 billion.
The rupee appeared to shrug off weakness in the yen, which often sets the tone for Asian currencies.
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