Rupee held unchanged by portfolio outflows, RBI reservations

The Indian rupee was little changed to the U.S. dollar on Monday, with traders wary that the local currency may not see much upside on foreign equity outflows and the possibility of the central bank's intervention

The rupee was trading at 81.3150 per dollar by 10:08 a.m. IST, compared with 81.3250 in the previous session. As on Friday, the local currency was finding it difficult to make headway above the 81.20-81.25 levels.

"The rupee continues to underperform its peers in Asia due to the FPI (foreign portfolio investment)," said Anindya Banerjee, head of research - fx and interest rates at Kotak Securities.

Banerjee pointed out that foreign investors had sold about $2 billion of Indian equities and debt so far in January.

Meanwhile, the Reserve Bank of India (RBI) is suspected of buying dollars on rallies in the rupee to shore up its reserves.

India's forex reserves, thanks to the RBI's purchases and the dollar's tumble, have risen from around $524 billion in mid-October to nearly $562 billion currently.

The RBI's intervention and oil companies hedging their imports were among the negative factors for the rupee's near-term outlook, said Amit Pabari, managing director at CR Forex.

With U.S. inflation data out of the way, the focus this week will be on retail sales, producer prices and industrial output data this week. The dollar index DXY was hovering below 102.

The data comes amid expectations that the Federal Reserve policy rate was near its peak. The Fed is likely to halt interest rate hikes following another 50 basis points increase in borrowing cost, economists expect.