The Indian rupee held in a tight band on Monday, as state-run banks possibly acting for the central bank sold dollars to keep the local unit from weakening beyond 43 to a dollar as stocks closed at a 10-month low. "Oil prices and inflation are high, so at a time when they are trying to tame inflation, the central bank will not want to have a weaker currency," said L. Subramanian, chief dealer with ICICI Bank.
The partially convertible rupee ended at 42.965/975 per dollar, 0.1 percent weaker than its previous close of 42.93/94 on Friday. It hit a 13-month low of 43.21 in May. Traders said there was only offshore-related and foreign institutional investors buying dollars in the market, but the demand was being met by state-run banks. One-month offshore non-deliverable forward contracts were quoting at 43.25/35, 0.7 percent weaker than the onshore rate.