The Indian rupee edged up on Monday, helped by foreign fund inflows and the dollar's weakness against major currencies, but the gains were limited by suspected intervention by the central bank.
Dealers said some state-run banks had consistently sold rupees for dollars, possibly on behalf of the central bank. The partially convertible rupee closed at 44.61/62 per dollar, stronger than Friday's close of 44.655/665. "I would call this softer intervention," a chief dealer with a foreign bank said. "I am more comfortable with this type of operation because they at least allowed the rupee to move up, keeping in view the weak dollar," he said.
The dollar recovered on Monday from a 20-month low against a basket of currencies. Expectations that the US Federal Reserve might cut interest rates next year had pulled down the dollar.
Intervention by India's central bank over the past month, possibly to keep exports competitive, contributed to a rise in foreign exchange reserves to a record $172.8 billion as at November 24, analysts said. It has also hit the market's trading interest.
The rupee hit a eight-month high of 44.35 per dollar on November 10 but strong intervention had forced it down. "Now that the central bank is so aggressively defending, there is little trading interest," a chief dealer with a corporate said.
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