The Indian rupee slipped off a new five-year peak and ended a shade weaker on Thursday, following sustained dollar buying by several foreign banks which had gone short on the US currency, dealers said. Traders said foreign capital inflows were also a lot lower on Thursday than expected, with overseas investors appearing to take a breather after buying $846 million worth of local shares in the previous four sessions.

The rupee closed at 43.4100/4300 per dollar, well off its 43.30 five-year high earlier in the day and a tad weaker than Wednesday's five-year closing peak of 43.40/42.

"A lot of short-covering (of dollars) happened towards close and pulled the rupee down," said M.G. Srinivas, senior dealer at ING Vysya Bank in Bangalore.

The rupee had been buoyed earlier by Standard & Poor's upgrade of India's foreign currency rating by one notch to 'BB+' on Wednesday, and expectations of more capital inflows.

Traders said the rupee was likely to maintain a rising trend on Friday, though upward moves would be more cautious ahead of a weekend meeting of the Group of Seven most industrialised nations, which will be attended by China and India.

Copyright Reuters, 2005