Rupee lifted in late trade on inflow view

By C.J. Kurrien

MUMBAI (Reuters) - The rupee climbed in late deals on Friday as exporters and a large corporate aggressively sold the dollar on the view that local unit was heading back towards near-decade highs hit earlier this month, traders said.

The partially convertible rupee closed at 39.62/63 per dollar, strengthening from Thursday's close of 39.75/76.

It strengthened to 39.16 earlier this month, its highest since March 1998, but had since weakened under pressure from central bank intervention and foreign selling of local stocks.

"For most of the afternoon the RBI did not intervene, and the market took that as an opportunity to push the (dollar/rupee) pair lower," said a dealer with a foreign bank, referring to the Reserve Bank of India.

"Barring a catastrophe, the flows are going to continue at a steady pace, so there's no real reason for people to be long on the dollar," the dealer added.

Sentiment on the rupee was boosted after India's benchmark share index ended up 1.9 percent, raising the prospect of a renewed burst of foreign buying of stocks.

Rising expectations of a U.S. rate cut weighed on the dollar, which drifted against other major currencies on Friday, but helped lift Asian shares.

JPMorgan said the medium-term prospects for the rupee remained positive, and revised their dollar-rupee forecast to 38 from 39 for the 4th quarter of 2008.

"Despite near-term hiccups, the rupee will retain a strengthening bias over the medium-term owing to robust capital inflows and continued hedging of receivables by exporters," JPMorgan said in a note on Thursday.