The Indian rupee snapped a four-day gaining streak on Tuesday, retreating from 11-month highs hit in the previous session after oil importers rushed in to buy dollars, while a rally in domestic shares slowed after powerful recent gains.
Traders said the dollar buying by state-owned banks, which they said was likely on behalf of the central bank, also aided the rupee's fall. The intervention was spotted around 58.60 rupee levels, traders said.
Intervention from the Reserve Bank of India has been capping broader gains for the local currency, dealers said, as the central bank builds up currency reserves and is drafting a game plan to protect the rupee against the sort of rout that alarmed policymakers and investors last year.
"Rupee should consolidate gains around 58.69/70 per dollar levels with two-way interest keeping the currency range-bound," said Vikas Babu Chittiprolu, chief foreign exchange dealer with state-run Andhra Bank.
The partially convertible rupee closed at 58.63/63 per dollar versus 58.59/60 on Monday.
The retreat from the 11-month high of 58.32 per dollar hit on Monday could mark a period of consolidation after a rally sparked by hopes that Narendra Modi's Bharatiya Janata Party would handily win the country's elections.
Those expectations were more than met on Friday, with the BJP gaining a big majority, which markets hope will translate into major economic and fiscal reforms.
Still, traders warn opportunistic buying of dollars by the RBI and companies could cap broader gains in the rupee for now.
In the offshore non-deliverable forwards, the one-month contract was at 58.94, while the three-month was at 59.53.
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