The rupee on Wednesday posted its biggest single-day gain since mid-May and rose to its highest level in more than two weeks on the back of heavy dollar sales by custodian banks along with some corporate dollar inflows.
Aiding sentiment was a record run by stock markets after finance minister Arun Jaitley’s warning against ‘mindless populism’ raised hopes the government would unveil a fiscally prudent Budget next week.
Traders said the central bank was spotted buying dollars sporadically after the unit crossed 59.70 levels, but strong inflows helped the rupee continue to gain nonetheless.
The Reserve Bank of India has tended to intervene when the rupee strengthens above 60 to the dollar.
“Now that the psychological level of 60 has been breached and with a close of below 59.70, there could be potential further gains for the rupee. But RBI can step in to buy at any point,” said Paresh Nayar, head of foreign exchange and fixed income trading at First Rand Bank.
The partially convertible rupee closed at 59.68 per dollar compared with 60.08 on Tuesday. The unit rose to 59.62, its strongest since June 13, while the day's low was 60.07.