The rupee rallied to the strongest level in six weeks, fueling bets the currency can extend gains, helped by the authorities’ steps this month to boost foreign-currency inflows.
The rupee rose as much as 0.3 per cent to 94.29 per dollar, its highest since May 7 and an advance of 1.5 per cent over the last four sessions, before trimming gains to be little changed on the day at 94.50. Improving sentiment helped the currency breach its 50-day moving average this week, a sign of bullish momentum.
"The rupee has traded well over the past few days, drawing support from RBI’s series of measures to attract capital inflows,” Wee Khoon Chong, Asia Pacific market strategist at BNY, told Bloomberg News. If oil prices continue to decline and the dollar weakens further, the rupee could strengthen toward 93.39 per dollar having breached the 50-day moving average, he said.
India on June 5 announced a slew of measures to boost foreign-currency inflows and support the rupee, which fell to a record low last month. The steps included tax exemptions for foreign investment in government bonds, as well as incentives for state-owned firms borrowing from overseas and banks raising foreign-currency deposits.
The measures are estimated to attract $75 billion to $80 billion in inflows over the coming months, according to economists at ICICI Bank.
The rupee has already benefited from a pickup in overseas demand for local debt. Foreign investors have bought index-eligible bonds for nine straight days, with total purchases of $2.2 billion. Foreign inflows into Indian debt are on track for their strongest month since March 2025.