Indian rupee pares gains against dollar

Mumbai: The Indian rupee pared most of its gains against the dollar yesterday as demand for the US currency from importers and a state-run bank weighed, but the mood remained bullish after hefty rate cuts by the central bank.

The partially convertible rupee closed at 48.56/58 per dollar, little changed from its Friday's close of 48.58/60. It rallied in early trade to an intraday high of 48.15, buoyed by the Reserve Bank of India's monetary easing on Friday.

The central bank cut its short-term rates by 1 percentage point each, its fourth cut since late October, and tried to draw more funds into the country to boost growth as it warned of a tough year ahead.

It more than doubled the FII cap in corporate bonds to $15 billion from $6 billion. "A large state-run bank was buying dollars today. There was also some importer demand seen," a senior dealer at a foreign bank said.

"The dollar also rose against major currencies today, so that is also weighing, but the medium-term outlook for the unit is bullish," he added.

The dollar climbed broadly yesterday, hitting its highest level in three weeks against the yen as rising share prices eased some risk aversion and put the Japanese currency under selling pressure.