RBI suspected as rupee held at 2009 highs

The rupee had run up to around 46.90 in morning trade,and had since been held there by dollar demand from state-run banks,who traders said appeared to be acting on behalf of the Reserve Bank of India (RBI).

“The RBI has been continuously buying around 46.90 levels. Whether we go further higher from here depends on them,” a senior dealer with a foreign bank said.

Two traders estimated the central bank to have purchased about $400 to $600 million so far during the session.

The RBI has previously said it buys or sells dollars in the market to prevent excessive volatility in the rupee.

At the high of 46.89,the rupee was up more than 2 per cent in the past four sessions and had gained 11 per cent from its record low of 52.2,touched in early March.

Heavy inflows into shares have been a key driver of the rupee’s rise since March. Foreigners have pumped a net $4.2 billion into local shares so far in 2009,after having pulled out a record of more than $13 billion last year.

On Monday the stockmarket was up 1.2 per cent as brightening signs of a revival in the global economy,raising expectations of further rupee-boosting inflows.

“Gains in other Asian currencies and regional stocks being in the green have helped the rupee,but 46.80 may be the base,considering past intervention at that level,” said V. Kumar,chief dealer with State Bank of Travancore.

Dealers said stronger-than-expected growth data on Friday,which some saw as indicator the RBI’s easing cycle was at or near an end,also supported sentiment for the rupee.

The dollar index,a gauge of the US unit’s performance against majors,was down 0.8 per cent as optimism about the global economy continued to boost currencies perceived to be riskier.

Other Asian units were also stronger versus the dollar.

One-month offshore non-deliverable forward contracts were quoting at 46.93/47.03,little changed from the onshore spot rate.

Goldman Sachs in a note on Monday reiterated their 12-month dollar-rupee target of 46.