INDIA RUPEE-Rupee inches up; 'stubborn residue' of US-India trade frictions an overhang

(Updated at 0505 GMT) By Nimesh Vora MUMBAI, Oct 7 (Reuters) – The Indian rupee rose slightly on Tuesday, buoyed by expected capital inflows, though sticky U.S.-India trade issues are likely to keep the currency's upside in check, analysts said. The rupee was quoted at 88.7375 to the U.S. dollar at 10:35 am IST, up from Monday's level of 88.78. Expectations of inflows tied to two initial public offerings — Tata Capital’s $1.75 billion share sale, which kicked off on October 6, and LG Electronics India’s $1.3 billion IPO that opened on Tuesday — offered support. Both IPOs are expected to attract interest from foreign investors, offering the rupee much-needed relief. "The market is quiet for now, yet the stubborn residue of U.S.-India trade issues remains a problem for the rupee," a trader said. Market participants note that the punitive U.S. tariffs on Indian goods will cap the upside on the rupee, prompting cautious positioning among importers and investors alike. Lingering trade tensions, persistent foreign fund outflows, and the recent hike in H-1B visa fees are likely to keep the rupee under pressure, HDFC Bank said in its daily note. The currency is expected to remain vulnerable unless positive developments emerge on the U.S.-India trade front, the note added. The rupee has shown limited volatility over the past week, likely reflecting active intervention by the Reserve Bank of India (RBI), which is helping to cap the rupee's downward bias, said Anindya Banerjee, head of currency and commodity research at Kotak Securities. Meanwhile, Asian currencies were mostly range-bound on Tuesday, while the dollar index held above the 98 level. The Japanese yen was little changed after Monday's plunge, holding below 150 to the dollar. Japan's finance minister said authorities were watching out for excessive moves in currency markets. (Reporting by Nimesh Vora; Editing by Sonia Cheema and Janane Venkatraman)

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