MUMBAI – The Indian rupee rose to its highest level in nearly six weeks against the U.S. dollar Friday, a day after the central bank was seen aggressively selling the greenback.
There are no indications so far Friday that the Reserve Bank of India was in the market again.
Friday morning, the dollar was trading at 51.36 rupees, its weakest since Dec. 5, and down from 52.60 rupees in late Asian trade Thursday.
Apart from Thursday's apparent RBI action, the rupee has been helped up also by increasing capital flows into high-yielding local debt and an improved global risk appetite after the European Central Bank paused its interest rate cuts.
The rupee's recent strength has been in sharp contrast to its performance in 2011 when it was Asia's worst-performing major currency, weighed by India's wide current account deficit and weakening economic fundamentals.
The U.S dollar rose about 19% against the Indian currency in 2011.
But market observers say the rupee may not be able to sustain its gains because of continuing concerns about economic growth and the country's gaping current account deficit.
Philip Wee, a senior currency economist at DBS Group Holdings, said investors may wait to see the central bank's policy stance toward boosting growth before continuing to put in foreign capital.
Satyajit Kanjilal, chief executive of currency trading firm Forexserve, added "in the near-term, the rupee will strengthen further on debt focused inflows and likely investment from non-resident Indians into higher return deposit schemes."
