The rupee inched higher on bunched up dollar inflows following the public holiday on Tuesday. The Indian markets were closed on Tuesday on account of the Gandhi Jayanti national holiday.
The rupee rose today to a fresh five-month high against the US currency in early trade on continued dollar selling by exporters and some banks. Besides, a higher opening in the local equity markets also supported the rupee.
It ended at 52.17 after being as high as 52.13 and as low as 52.58. It opened at 52.54 versus the previous close of 52.40.
Today's closing level for the rupee is the highest against the US Dollar since April 22.
However, the dollar's gains against other currencies in the overseas markets capped the rupee's gains.
Onshore rupee forwards rose to the highest level in more than five months on optimism that the Government will continue to announce more reform measures to boost a slowing economy and attract overseas capital.
FIIs pumped US$4.1bn into Indian shares in September, the most since February.
One-month rupee onshore forwards touched 52.67 earlier, the strongest level since April 23.
Goldman Sachs today said that it sees the current rally in rupee to continue with the currency closing the year at 51 to the dollar.
The rupee has been rising steadily since July, after hitting a life-time low of 57.13 mid-June. Year-to-date, the local currency is up over 7%; it is still down 18% from its pre-August 2011 highs.
The rupee closed 2011 as the biggest loser among the BRIC currencies.
Goldman Sachs has pegged the current account deficit (CAD) at 3.5% for the current fiscal year.
"We remain positive on the rupee due to an improving CAD and greater capital inflows, in part due to the recent reform efforts by the government, as well as the global easing of liquidity. We maintain our 12-month rupee target at 51 to the dollar," Goldman Sachs said in a note today.
In the overseas currency markets, the euro erased a 0.2% advance against the Japanese yen, leaving it little changed at 100.97 as of 12:03 p.m. London time.
The 17-member currency was also little changed at US$1.2906.