Mumbai: The rupee rose within sight of an eight-month peak against the dollar on Friday, tracking its weakness against some major currencies, and as importers hesitated on hedging positions in anticipation of further rupee gains.
At 1035 hrs IST, the partially convertible rupee was at 44.37/44.38, 0.4 per cent higher than the previous close of 44.56/57 and a tad below 44.34 - a level it last tested in early March.
"There has been some big capital inflows to the extent of around $700-900 million and that has seen the rupee gapping higher. But we may be reaching a level where the central bank may step in," said a senior currency dealer at a local brokerage.
Big capital inflows into local equities in recent months and a soft dollar trend overseas has sent the rupee up by about 6 per cent since a three-year low of 47.04 in July.
However, traders are growing increasingly cautious of pushing the rupee higher, nervous that the central bank may step in to protect its export competitiveness.
According to a JP Morgan index , the rupee is overvalued by nearly 9 per cent compared to about 7 per cent a month ago.
Dealers said the central bank may have intervened in the currency markets earlier this week by buying dollars to temper the rupee's rise and many were wary it could do so again.
"The rupee may settle around current levels as global signs are a bit mixed with oil edging higher and the dollar softer," said a trader at a foreign bank.
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