Bunched up inflows from custodian banks, largely from FIIs, looking to buy Indian equities was the primary reason behind the rupees rise today.
Raghuram Rajan's Reserve Bank of India (RBI) was heard to be paying on the forward, probably unwinding some of the forward sales it had contracted last year. As a result, the 12-month forward is quoting at 513/516 paise, highest level since mid-August of last year.
Outlook: Over the near-term, we can expect ranged activity in the Indian rupee, US dollar pair, with central bank showing more intent to absorb inflows closer to 59.00 handle on spot. As a result, a range of 59.00/59.50 and 60.30/50 can be seen over the near-term.
By Anindya Banerjee, currency analyst, Kotak Securities