MUMBAI (Reuters) - The rupee was knocked off its three-week high in afternoon trading on Wednesday as local stocks reversed early gains, but expectations of strong capital inflows limited the currency's fall.
* At 2:40 p.m. (0910 GMT), the rupee was at 48.98/99 to the dollar, down from 48.83 -- its highest since February 7, according to Thomson Reuters data. It had settled at 49.0750/0850 on Tuesday.
* Traders said an auction of state-run Oil and Natural Gas Corp's shares is expected to see strong bidding interest from foreign investors, which will support the rupee.
* The government aims to raise at least $2.5 billion by selling a 5 percent holding in the country's biggest oil producer through an auction on Thursday.
* Caution in the financial markets ahead of results of the European Central Bank's long-term refinance operation at around 1020 GMT also weighed on the rupee, traders said. The LTROs are awaited for clues on euro zone's economic health and global growth trajectory.
