The Indian rupee climbed to a fresh nine-year peak on Monday as foreign investors chased returns in the record breaking stockmarket, but its ascent was limited by suspected central bank intervention, dealers said.
The partially convertible rupee ended at 39.770/775 per dollar, easing slightly from an intraday peak of 39.72, a level it last traded in May 1998, but rising smartly from Friday's close of 39.90/91. "The flows were immense, and there's no reason for the rupee to stop moving up, despite the central bank trying very hard to stop it," said the chief dealer with a foreign bank. India's main share index rose 1.7 percent, bolstered by strong capital inflows, and hit a record high during late trade.
Foreign funds moved more than $1.2 billion into Indian shares over three days after a sharp US rate cut sparked interest in emerging market assets. The rupee has appreciated more than 11 percent this year.
Dealers said the central bank bought between $700 million-$1 billion on Monday in a bid to arrest the rupee's rise. But the intervention was undermined after the US currency fell to a record low against the euro for a third straight session, weighed down by expectations of further rate cuts, which is reducing the dollar's appeal among investors.
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