The rupee rose for a fourth straight session to a near two-week high on Tuesday on strong foreign inflows into stocks and as global risk sentiment was boosted after China's central bank governor said the yuan's trading band will be widened.
Foreign fund inflows into local stocks have already totalled nearly $900 million in November, adding to the rupee's gains after $2.6 billion inflows in October. Foreign banks have been consistent dollar sellers in recent sessions as they buy into Indian equities.
However, dealers said that most of the rupee's gains were lost on consistent dollar demand from state-run oil refiners and other importers.
Reserve Bank of India chief Raghuram Rajan recently said that most of the dollar demand of oil companies is being routed back through the forex market instead of the special swap window opened after the rupee slumped to its life low in late August.
"We will see oil companies bidding when the rupee dips below 62 to the dollar which will check rupee gains," he said.
The partially convertible rupee closed at 62.36/37 per dollar, compared with 62.41/42 on Monday. It has gained 2.2 percent in the past four sessions.
It rose to 61.87 in session, its highest since November 6.
Global factors have also had a large hand in the rupee's recent rally.
Prospect of extended stimulus in the United States and reforms in China had spurred a risk rally on Monday.
On Tuesday, China central bank chief Zhou Xiaochuan said the country will gradually expand the yuan trading band to help make the currency more flexible and market-driven.
In the offshore non-deliverable forwards, the one-month contract was at 62.97, while the three-month was at 64.05.