Rupee slightly up, but month-end dollar demand keeps lid on gains

MUMBAI, Aug 31 (Reuters) - The Indian rupee rose on Thursday, tracking the move higher in Asian peers following U.S. GDP data, but had to contend with month-end dollar demand.

The rupee was at 85.6725 to the U.S. dollar by 11:02 a.m. IST, compared with a close of 82.7325 in the previous session.

Asian currencies rose after the dollar index dropped to a two-week low overnight, following a downward revision to the June quarter U.S. GDP numbers.

“Yet again, the cues from Asia are good, but then rupee is not benefiting much,” a forex trader at a bank said. “The month-end cash dollar demand from oil and other importers is keeping rupee in check\”

Gross domestic product (GDP) in the U.S. increased at an annualised pace of 2.1% April-June quarter, data from the second GDP estimate showed.

This estimate is a revision of the 2.4% growth rate estimate reported last month. Economists polled by Reuters expected GDP for the second quarter to be unrevised.

At one point in the New York session, the dollar index dropped below 103.

The dollar bulls were probably too optimistic regarding the resilience of the U.S. economy and are now facing disappointment, said Amit Pabari, managing director at fx advisory firm CR Forex.

Data that showed U.S. private payrolls rose by a less-than-expected last month also hindered the dollar index.

Meanwhile, traders await Indias June quarter GDP data, due later in the day. While the data is not expected to have a major impact on the rupee, it will “provide a read” on how equity inflows could shape up, the fx trader said.