The upward movement of the rupee against the U.S. dollar was sharp in recent weeks as the Indian currency has climbed about 5.6 per cent since the beginning of September due to sustained capital inflows. However, the pace of the move surprised many.
Inflows from foreign institutional investors (FIIs) so far in the calendar year have topped a record $24 billion and the rupee is up 4.4 per cent. In September alone, net FII inflows touched a record $8 billion. For the first time in this year, the Reserve Bank of India intervened and bought dollars from the market to cool the rupee appreciation.