MUMBAI, Aug 4 (Reuters) - The Indian rupee logged modest gains on Tuesday, supported by dollar sales by foreign banks, although gains were capped on account of importer hedging activity.
The rupee was last at 95.30 per dollar, up marginally from its close at 95.3325 in the previous session. It has gained more than 1% from a two-month low hit last week.
The rupee's upward trajectory has continued to run into importer dollar buying, traders said, with oil refiners and gold importers among those hedging actively.
Persistent dollar selling interventions by the Reserve Bank of India alongside a sharp retreat in oil prices have helped shore up the currency amid signs of sustained inflows as part of steps to strengthen India's balance of payments.
The RBI's measures have attracted inflows of over $40 billion, with State Bank of India, HSBC and ICICI Bank garnering the largest amounts under the mechanism.
Combined, banks' stock of overseas foreign-currency deposits grew by nearly $28 billion between June 5 and July 30.
The strong inflows, which have eased pressure on the rupee, alongside largely contained price pressures are expected to give the RBI room keep rates on hold this week, economists said, even as many of its peers pivot to rate hikes.
MUFG expects the rupee to trade between 94 and 95 over the next three to six months, before retreating towards 96 over the medium term. The firm expects the RBI to raise rates by 50 basis points starting from the October-December quarter.
Elsewhere, Indian equities are navigating the launch of a new mechanism to price stocks at the close, with the benchmark indexes signalling divergent moves even as underlying sentiment remains upbeat.
Asian stocks were modestly higher, while regional currencies were mostly rangebound.
Reporting by Nimesh Vora; Editing by Mrigank Dhaniwala and Sonia Cheema
Source: Reuters