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Rupee steadies at 48.71/$ after VHP drops plan

The rupee recovered from early lows on Friday as concerns that trouble could erupt in the holy town of Ayodhya ebbed after the Vishwa Hindu Parishad dropped plans to conduct puja at the disputed site.

The local currency ended at 48.7050/7150 per dollar, off early lows of 48.7350 and barely changed from Thursday's one-week closing high of 48.7075/7175.

"Ayodhya is moving out from centre-stage. Flows that could have been impeded because of Ayodhya will start coming in, and I expect foreign capital inflows to be robust," said a chief dealer in a foreign bank.

"But the rupee is unlikely to gain much as the central bank will absorb these flows."

Traders said sentiment improved after the hardline Vishwa Hindu Parishad said it would not hold its controversial prayer ceremony at the site, where a mosque was demolished by Hindu extremists 10 years ago, but conduct it elsewhere in Ayodhya.

The ceremony subsequently passed off peacefully, with thousands of security forces in full riot gear deployed in the northern Indian city.

Traders said dollar inflows from a media company and custodial banks offering services to foreign funds were mopped up by state-run banks acting on behalf of the Reserve Bank of India.

Data from the capital market regulator showed overseas funds had invested a net $102.7 million in Indian assets between March 1-14, taking investments in 2002 to $731.5 million.

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