The Indian rupee inched up on Thursday with sentiment bolstered by stocks that rose by nearly 1.5 percent, but suspected central bank intervention capped the unit's gains. The rupee ended at 40.94/95 per dollar, just higher than Wednesday's 40.96/97. The rupee hit a nine-year peak of 40.28 in late May.
"The inflows were not that strong today and the RBI was able to check the rupee with ease," said the chief dealer with a private bank, referring to the Reserve Bank of India. Recent data showed that India's industrial production in April grew a surprisingly robust 13.6 percent from a year earlier, boosting the outlook for the fast-growing economy.
Dealers said that the central bank intervened once again to limit the rupee, which has been hovering near nine-year peaks, buoyed by robust capital inflows. Large inflows could result in the overvaluation of the rupee and erode competitiveness of traditional and goods sectors in the long term, India's deputy central bank governor, Rakesh Mohan, said in a paper for a Bank of France seminar in Paris on Thursday.
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