Mumbai: The rupee marched near to a fresh nine-year peak today, hiked up by strong capital inflows, but caution the RBI may interfere checked the rupee’s increase.

In early trading, the partially convertible rupee stood at 39.88/89 per dollar, barely changed from its last close of 39.89/90 and in sights of 39.85 its record since May 1998.

A market dealer said, “These are good levels to take some profits as the rupee has rallied quite a lot this week.”

The rupee gained 1.7% thus far this week as a large US rate cut rekindled hunger for high-yielding assets.

The rupee is Asia’s best acting currency, arising 11% since end-2006.

A half percentage point slash in U.S. interest rates has extended the premium rate to 300 basis points, which is its highest peak in 3 years and another attraction for foreign investors.

Foreigners purchased $608.6 million worth of shares on Wednesday, a day after the US rate cut bringing their net buys to $10 billion this year, up from about $8 billion in the last year.

Still, gains were muted on heavy dollar purchases by state-owned banking institutions but market traders stated that it was hard to say whether they were purchasing in support of RBI.

They anticipated that the RBI spent $400-700 million in the last two sessions in order to slowdown the rupee's increase. The central band had purchased over $38 billion in the first seven months of the existing fiscal to limit the rupee.

In a morning note, UBS stated that the RBI may let the Indian currency to climb in the coming days to as much as 38 as intervention may add to inflation-fuelling cash.