Softening oil prices and exporters' rush to bring back dollars are bolstering the rupee, which has appreciated by around 60 paise since touching an intra-day low of 48.43 on September 17.
The Indian currency closed at 47.85/86 today, gaining 15 paise since its Friday's closing of 48.01/03 against the dollar.
"The Reserve Bank of India's intervention through public sector banks initially calmed the volatile market. Now, the trend is almost reversed with plenty of dollar supply as exporters are bringing back export proceeds. The sentiment changed for the better with oil prices under control," said a dealer with a public sector bank.
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Meanwhile, forward premiums are soaring as corporates are hedging against uncertainties. Besides, there is also month-end demand. The hopes of bank rate cut stemmed the rise but the premiums started shooting up again yesterday. The six-month annualised forward premium jumped from 4.64 per cent on September 11 to 6.45 per cent today.
Since the beginning of the current fiscal, the Indian currency has depreciated by 124 paise (2.66 per cent) to the dollar.
"The reasons for the rupee to stabilise are not far to seek. The market has come to digest the fact that the US campaign against the Taliban regime is going to be long and the oil prices are softening due to the threat of a global recession and expectations of steady supplies from Opec producers," a forex dealer said.
In real effective exchange rate (REER) terms, there is no reason for the rupee to depreciate beyond the 48 level unless something adverse happens in the US-Afghan conflict, he pointed out.