The rupee closed slightly stronger on Thursday, tracking gains in shares but investors largely stayed on the sidelines in the absence of any fresh cues, with the apex bank continuing to actively intervene in the market to prevent any volatility.
The Sensex edged higher on Thursday as blue-chips such as HDFC Bank rose on hopes that economic data due later in the day may show easing retail inflation and a pick-up in industrial activity. (Read more)
India's annual consumer price inflation eased to 8.28 per cent in May, helped by slightly cooling food prices, government data showed on Thursday. Industrial production rebounded more than expected in April to grow 3.4 per cent over year-ago levels, after output had fallen in the previous two months.
"Rupee has been in a tight range and will continue to do so until the central bank is in the market to support the pair. We could see some volatility around the budget," said Paresh Nayar, head of fixed income and foreign exchange at First Rand Bank.
Traders broadly expect the rupee to hold in a 58.80 to 59.60 range until the budget due by mid-July.
The partially convertible rupee closed at 59.25/26 per dollar, little changed from 59.27/28 on Wednesday. The unit moved in a tight range of 59.2375 to 59.3650 during the session.
Traders will monitor movements in other Asian currencies and shares for opening cues until the budget.
The South Korean won eased on Thursday, but cut some of its losses after the central bank chief said effects from changes in the value of the won were more important than specific levels. Broadly Asian currencies were trading mixed.
In the offshore non-deliverable forwards, the one-month contract was at 59.48 while the three-month was at 60.01.
Copyright @ Thomson Reuters 2014
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