The rupee on Friday rose more than one per cent touching an 11-week high against the dollar.
The rupee opened higher at 49.72/73 per dollar at the Interbank Foreign Exchange (Forex) market from Wednesday’s close of 50.08/09 per dollar.
At 4.50 p.m., the rupee was ruling at 49.34.
Currency experts said that this was not in anyway a sign of economic recovery, but due to the increase in capital inflows.
“Basically, the capital inflows into equities have increased over the last few days as have the bookings from exporters. The RBI’s decision to slash CRR by 50 basis points has added to the consumer confidence,” said Mr. Jatin Damani, Head Currency, Bonanza Portfolio.
Says Mr Moses Harding, Head, Global Markets Group, IndusInd Bank, "The rupee has unwound most of its weakness from 48.61 to 54.30 and now looks good for extension below 49.20 into 48.60.
"The reversal from 54.30 was triggered by the RBI cutting out abnormal dollar demand and pulling in supplies from FII/NRI investors. Higher FX premium is also keeping the forward market in dollar supply driven mode.
"Now, shift of the RBI into growth supportive monetary stance will attract FII flows into equity capital market. FED's stance to maintain near zero interest rate regime has resulted in reversal of dollar gains against major currencies.
"At this stage, lot of rupee bullish factors have emerged and it is up to the RBI to bridge the supply-driven gap to arrest extended rupee gains below 48.60. I would consider 49.20-48.60 is strong support zone for the dollar and it is prudent for importers to close exchange rate exposures. Having seen the risk of extension into 56-58, it is not prudent to chase rupee gains beyond 49.20."
