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Rupee eases from nine-year peaks

MUMBAI — The Indian rupee edged away from nine-year highs yesterday as traders saw the central bank continuing to intervene to check the unit's rise, a day after it raised the ceiling on special intervention bonds.

The partially convertible rupee ended at 39.48/49 per dollar, off an early high of 39.43 but a notch above Thursday's close of 39.49/50.

It hit 39.36 on Thursday, its strongest since March 1998 and has gained one per cent this week. The rupee is up more than 2.5 per cent since the US Federal Reserve cut rates last month.

It has risen 12 per cent in 2007. "The market has taken a breather today and activity has been relatively subdued, compared to earlier this week," said V. Rajagopal, head of currency trading at Kotak Mahindra Bank.

"Stocks also have taken a pause and the central bank is clearly indicating it will continue to intervene fairly aggressively."

After market hours on Thursday, the issue limit on market stabilisation scheme bonds (MSS), which the central bank can use to absorb funds released by its rupee-selling intervention, was lifted to Rs2 trillion ($50.6 billion) from 1.5 trillion.

The central bank bought $38.1 billion in the first seven months of 2007 in a bid to cap the rupee, latest data shows, but massive capital flows have continued to pour into the fast-growing economy, pushing the rupee higher. Foreign funds bought about $5 billion of stocks in the 10 sessions after the Federal Reserve cut interest rates on September 18.