The Indian rupee ended steady on Monday as a watchful central bank stepped in once again to limit the local currency's gains, dealers said. The rupee finished at 43.8150/8300 per dollar, a marginal 0.05 percent stronger than Friday's six-week closing low of 43.8300/8500 and well off a session peak of 43.76. The local currency had slipped in early trade as the market anticipated the central bank would continue its rupee selling of the past two weeks but found itself wrong-footed as intervention failed to materialise until later in the session.

"A lot of long dollar positions built up in the morning on expectations that the state-run banks would come in and buy (for the central bank)," a dealer at a state-run bank said.

"These then unwound, taking the rupee to 43.76 before the intervention began."

Traders said foreign funds' demand for rupees also appeared weaker than in recent sessions, making it easier for the central bank to contain the local currency.

The Reserve Bank of India, which says it lets the market determine the exchange rate on the partly convertible rupee and only intervenes to smooth out excess volatility, has kept the currency on a tight leash in the past two weeks, buying up a major share of the dollar inflows and swelling India's reserves.

Analysts said the RBI's recent action appears to have been prompted by a keenness to keep Indian exports competitive in the face of a burgeoning trade deficit.

Overseas portfolio investors, whose net purchases of a record $8.5 billion of Indian shares in 2004 helped the rupee gain 5 percent, have stepped up investments in equity this month after an indifferent start to the year.

Copyright Reuters, 2005