The Indian rupee jumped to a nine-year high on Monday, bolstered by strong capital inflows into the fast growing economy, but was knocked off its peak by central bank intervention, dealers said.
The partially convertible rupee ended at 40.2950/3050 per dollar, having risen as far as 40.23, its strongest since May 1998. It had closed last week at 40.3200/3275. "Nobody was expecting the rupee to spike as much as it did, and perhaps this indicates the central bank is willing to tolerate some more rupee appreciation," said a senior dealer with a private bank.
The Reserve Bank of India is widely believed to have bought dollars in recent weeks to prevent the rupee from rising beyond 40.30. It would not comment on whether it had intervened to weaken the rupee on Monday. "We do not comment on the intraday movement of the rupee," a central bank spokesman said.
The central bank bought $23.4 billion in intervention between January and May, data shows. Traders say it has also bought dollars through June and July to limit the rupee's rise.