India has been on a bull run this week, with its currency up more than 6% to over US$1,100 on Wednesday.
The currency is also up nearly 12% in a week, driven by a surge in forex flows.
The forex market is expected to take a hit next week due to India’s efforts to curb the flow of currency into the country, but there is some optimism that the economy will bounce back.
“There is definitely some momentum for the forex markets and the sentiment is good.
The rupee is going up and the Indian economy is growing and the dollar is falling and there is a lot of momentum behind the forext,” Andrew McLeod, a senior global strategist at brokerage FirstMark, told Bloomberg TV.
Forex stocks are expected to be among the biggest losers from the rupee drop.
The rupee has been the world’s second-largest reserve currency for the last 10 years, but the government has been pushing to cut its dependence on the Indian rupee and has sought to boost its exports through the dollar.
India has also raised interest rates to 4.25% from 3.75%.