The rupee strengthened 72 paise to 65.28 against the dollar on higher capital inflows and announcement of possible steps to reduce the fuel import bill.
Extending its previous session’s positive sentiment, the domestic unit opened 8 paise higher against the greenback at 65.92 from Thursday’s close of 66 per dollar.
At 2.55 p.m., the rupee was trading at 65.48 per dollar after hitting a high of 65.28.
However, it declined to 66.31 in the morning trade due to mild capital outflows as market investors remained wary of the US payrolls data due to be announced later in the day. This is likely to strengthen the dollar.
Thereafter, the rupee recovered to 65.49 against the dollar on reversal of capital flows and positive domestic equity markets.
The BSE-benchmark Sensex was also trading stronger by 223 points (1.17 per cent) at 10,203 points in the afternoon trade on foreign institutional investors pumping capital flows into the market.
In addition, higher credit growth in the banking system for August released by the Reserve Bank of India also supported the sentiment.
The surge in rupee on Thursday was on the back of announcements made by the new RBI Governor Raghuram Rajan on the first day of assuming charge.
Capital-control measures
The RBI, on Wednesday post market hours, had partially rolled back some of the capital flow curbs imposed in August. Relaxing the limit on outward investments, the apex bank said a company will be allowed to invest up to 400 per cent (from 100 per cent earlier) of its networth provided it has raised the funds through external commercial borrowings (ECBs).
The central bank also opened a special concessional window for swapping foreign currency non-resident banks (FCNR (B)) deposits for three years at a fixed rate of 3.5 per cent per annum. This boosted the market confidence on Thursday.
