MUMBAI: The rupee crept higher on Monday as capital flows into federal and corporate debt offset demand for dollars from oil importers.
The inflows came after an auction on Friday of unused limits, which allow foreign institutional investors to buy long-term government and corporate bonds, was oversubscribed.
At 10:30 a.m. (0500 GMT), the rupee was at 50.08/09 to the dollar, compared with Friday's close of 50.175/185.
"There are some foreign flows into debt, which is helping the rupee," said S. Nagarajan, head of forex dealing at Al Rostamani International Exchange.
"With the government's disinvestment target set for the next fiscal (year), inflows are likely to continue through the year."
In its annual budget presented on Friday, New Delhi set a 300 billion rupees ($6 billion) share-sale target in state-run companies in 2012/13.
However, the rupee, which swung between 50.065 and 50.19 in early trade, could weaken as far as 50.30 if oil payments pick up, traders said.
The one-month offshore non-deliverable forward contracts were at 50.55. In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and on the United Stock Exchange were all around 50.20, on a total volume of $723 million.
Oil is India's largest import item and oil refiners are the biggest buyers of dollars in the local market.
Brent crude held above $126 a barrel, extending Friday's gains, as prices were supported by continued concerns over a potential supply disruption from Iran and the prospect of a stronger US economy lifting oil demand.
