Mumbai: With sentiment boosted by anticipations for a US rate cut next week, the Indian currency climbed up on Friday, which could create more demand for higher-yielding assets, while suspected RBI interference limited gains.

In early trading (9:30 am), the partially convertible Indian currency stood at 39.45/46 per dollar as compared to its last closure of 39.485/495.

A senior dealer with a private bank said, “With the Fed decision around the corner, the market is building up positions in anticipation of lots of inflows.”

As compared to the last month (November), foreign funds have escalated their purchases of Indian shares in December. Foreign funds helped Indian rupee to climb 12% in the recent year.

Asian stocks touched their four-week highs on Friday, and this could pressurize domestic shares to rise for a third day in a row, whereas traders anticipate resistance to emerge as the market nears its record peak.

The U.S. Federal Reserve is likely to cut the key federal funds rate by 25 basis points to 4.25%.

The central bank is projected to intervene against the local unit as it heads back towards a near-decade high of 39.16 hit last month.

In the first nine months of 2007, the RBI has purchased around $52 billion to normalize the rupee's rise. It has also played an active role in the rupee market in October and November.