The Indian rupee traded in a narrow range on Friday, caught between strong capital inflows and central bank efforts to keep the currency from strengthening past 40.50 per dollar, dealers said. The partially convertible rupee ended at 40.5450/5500, up from Thursday's 40.61/62. On Monday it hit 40.28, its strongest level since May 1998.
"The RBI was buying dollars at 40.52, protecting the level it has been for weeks, and the market was happy to keep selling to it today," said a dealer with a foreign bank, referring to the Reserve Bank of India.
The RBI is thought to intervene to curb excess volatility and maintain exporters' competitiveness. It bought $22 billion in the five months to March-end in a bid to cap the rupee. The rupee is Asia's strongest currency against the dollar this year. It has gained about 9 percent, driven largely by strong capital inflows into the fast-growing economy.
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