The Indian rupee held near a recent nine-year high on Friday as expectations of renewed capital inflows boosted sentiment and a cash crunch in the money market spurred banks to pare dollar holdings, traders said.
But the market was also wary that the Reserve Bank of India (RBI) might intervene, which kept a lid on the rupee's gains. By 10:50 am (0520 GMT), the partially convertible rupee was at 42.0450/0550 per dollar from Thursday's close of 42.0650/0800.
The rupee touched a nine-year high of 41.62 this week as banks sold dollars to tide over a cash crunch following an increase in banks' cash reserve requirements last Saturday. "The market is overall still very bullish on the rupee," said a chief dealer with a private bank."Also after two days of rupee weakness, a slight pull-back was expected," the dealer said.