The rupee ended marginally lower on Wednesday as sentiment remained cautious with foreign funds continuing to be steady sellers of local debt ahead of key U.S. nonfarm payrolls data.
Foreign institutional investors have sold rupee debt worth $1.5 billion for nine of the 10 sessions to Tuesday. While the outflows have not assumed the proportions of last summer, which saw the rupee plunging to a record low of 68.85 to the dollar in late August, it nonetheless will ring a note of caution among policymakers.
To attract more stable flows, Reserve Bank of India last week doubled to $10 billion the amount of government debt longer-term investors such as sovereign wealth funds can buy. It lowered the limit for others by $5 billion to keep the overall foreigners' holding limit at $30 billion.
Sentiments continue to remain fragile ahead of the U.S. jobs report on Friday.
"Thankfully, risk aversion has hampered US yields and allowed a bit of breathing space for INR, as has the notion that the RBI is on hold for the time being. However, we'd still not see any great reason to be looking at long INR positions on a strategic basis," said Sacha Tihanyi, a senior currency strategist at Scotiabank.
The partially convertible rupee closed at 62.57/58 per dollar compared with Tuesday's 62.5250/5350.
The rupee has also found support from inflows, which dealers have attributed to likely dollars brought in by foreign mobile companies to pay for spectrum to be allocated at the end of an auction.
In the offshore non-deliverable forwards, the one-month contract was at 62.87, while the three-month was at 63.74.
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