The Reserve Bank of India has been suspected to have bought dollars aggressively over the last two trading sessions to shore up its foreign exchange reserve and prevent a massive appreciation in the local unit which could be detrimental to export growth.
Analysts say though the near-term bias is for the rupee strength, investors must remain cautious.
The stability and INR appreciation is good news, but be on close guard against an INR weakness which can happen if there is a pull-out of hot FII money and on the back of any election-related negative news.
Foreign fund inflows into domestic shares, which hit record highs for a fourth consecutive session on Thursday, have been a key factor helping the rupee.
The rupee closed at 60.31/32 per dollar compared with 60.14/15 on Thursday. The rupee had hit an eight-month high of 60.04 on Wednesday.
Gains in the domestic share market and other Asian currencies limited further losses in the local unit. Emerging currencies held near multi-week highs to the dollar, buoyed by Chinese stimulus hopes and stable U.S. yields.These are beginning to look like a distant dream.
In the offshore non-deliverable forwards, the one-month contract was at 60.58 while the three-month was at 61.24.re to edit.