The rupee posted its biggest single-day gain in more than a month on Thursday as large unwinding of long dollar
positions in the
non-deliverable forwards prompted banks to sell dollars in the spot market.
The partially convertible rupee closed at 48.33/34 per dollar, off a high of 48.25, which was its strongest since November 11, and above its previous close of 49.03/04.
At its close, the rupee gained 1.4%, which was its best since a 2% rise on November 4.
"It was more due to some unwinding of the NDF positions," said Paresh Nayar, chief dealer at Development Credit Bank.
The market was also underpinned by foreign inflows to the stock market, he said.
One-month offshore non-deliverable forward contracts were quoting at 48.37/52, just a shade weaker than the onshore spot rate in stark contrast to the largely lower rates seen in recent days, indicating a change in sentiment for the unit in the near term.
Foreigners have bought $482.9 million worth of shares in the last four sessions, but are net sellers of $13.3 billion so far in 2008. They had bought a record $17.4 billion last year.
Indian shares ended a seesaw session down 0.1% on Thursday, as market talk Reliance Industries was close to settling a gas dispute offered some cheer to gloomy investors worried by a deepening global downturn.
Another dealer said the rupee could head towards 47.90, if it broke past 48.25 significantly.
But Nayar was not so sure. "It's too early to say that the sentiment for the rupee has changed, it may just be a very temporary phase," he said.