The Indian Rupee surged 105 paise to settle at 6-week high of 54.39 against the US dollar on the back of strong inflows and improved market sentiment. The developments in India and overseas have shifted the preference towards riskier assets such as equities among foreigners. While last week’s EU summit boosted sentiments globally, inflows from FIIs have been strong because of changes in the Indian finance ministry.

Indian-Rupee-dips-to-all-time-low

One of the reasons for the new found optimism is that reform measures are on the way with Prime Minister Manmohan Singh taking over the charge of the finance ministry.

Though the stock markets continued to do not so well, but flat, data showed that the FIIs made net purchases of around Rs 590 crore.

Analysts said fresh dollar supplies were expected following the increased foreign investment cap in government bonds by $5 billion. These increased limits will be auctioned in a day or two.

Indian-Rupee-dollar

At the forex market, the rupee opened higher at 55.35 from yesterday’s close of 55.44. Selling of dollars by exporters and capital inflows into the equity markets turned the tide in favour of the domestic unit, which ended at 54.39, up 105 paise, or 1.89 per cent, registering the 4th-largest gain in absolute terms in the last decade. Experts are cautious about the longevity of this trend and maintain that much will depend on the steps taken by the government.