The rupee, which plunged to a record low of 62.03 to a US dollar on Friday, is likely to claw back to the 61 level this week on more capital inflows from overseas, according to analysts and treasury heads of banks.
"The RBI steps announced last week will start bearing the fruit this week as more NRI remittances are likely to flow in. The rupee is likely to trade in the 60.50-61.40 range this week," IDBI Bank treasurer NS Venkatesh told PTI.
India Forex Advisors' Abhishek Goenka said: "On Friday, the stock market plunged by 4%, but the rupee depreciated by only 30-40 paise due to some appreciation pressure. This week we may see a recovery because of the RBI measures."
The central bank last Wednesday announced more measures to lure NRI deposits to boost capital inflows. The market, since May 22, has seen a whopping USD 11.4 billion being pulled out by FIIs, mostly from the debt market.
However, no banks have so far announced any increases in NRI deposit rates, which are already in the range of 10.25- 10.50% since last December when RBI deregulated NRI deposit rates.
The rupee fell to an intra-day historic low of 62.03 on Friday after RBI on August 14 announced more steps to restrict forex outflows and gold imports.
The rupee closed the week at 61.51, but there was bloodbath on the stock markets which shed more than 4% on capital control worries, coupled with an earlier-than- expected end to the US bond purchase programmes, on solid growth numbers from the Western economies.
The RBI steps included curbs on domestic firms investing abroad and on outward remittances by individuals which sparked fears of a throwback to the 1991 era of capital control.
The central bank also reduced the limit for overseas direct investment (ODI) by domestic companies, other than oil PSUs, under the automatic route from 400% of net worth to 100%.
The RBI steps spooked investors as they thought that the government may move to a capital-control regime.
"Had the US jobs data would not be better, we would have seen a measurable impact of the RBI steps announced on Wednesday on the rupee," said Harihar Krishnamoorthy, treasurer at FirstRand Bank India.
Krishnamoorthy further said the fundamentals of the domestic economy have not deteriorated since the beginning of the fiscal, but sometimes sentiment overpower fundamentals.
Although the government as well as RBI last Friday claimed that they were not considering any capital-control regime, it did not either help the rupee or the markets, which saw investors losing more than Rs. 2 lakh crore in a single day.