, which recorded its biggest single-day gain in three years on Friday, may recoup to 54-54.50 level against the dollar this week on the back of positive outcomes from Euro summit
along with improved domestic sentiment, say experts.
On Friday, the rupee logged its second biggest gain in nearly three years rising by 119 paise, or 2.6 per cent, to settle at two-week high of 55.64, against the dollar on clarity on tax-avoidance rules.
However, the Indian currency is still down
4.6 per cent since January and 27.4 per cent since last August when the bad times for the local unit started after the US downgrade by Standard & Poor's.
"The rupee can recoup to 54-54.50 level in the near term if the positive sentiment continues along with strong action from the Euro area leaders to overcome the crisis," IDBI Bank Treasury Head N S Venkatesh said.
European Union leaders on Friday agreed to employ measures aimed at stabilising Spanish and Italian bond markets and establish a Eurozone-wide banking union, prompting a rally in equity markets worldwide.
"If the equity market sees positive capital inflows, then the rupee will definitely appreciate," Venkatesh added.
He, however, said the government has to take concrete policy actions to address the widening gap between current and fiscal accounts deficits to help the rupee move to sub-54 level.
While current account deficit has overshot the target by a wide margin to 4.2 per cent in FY12 as a whole, and to 4.5 per cent in Q4 of FY12, hitting a two decade low, the fiscal deficit too had risen to 5.76 per cent in the past fiscal against a target of 4.1 per cent.
"Overall sentiment is positive for the rupee, which is likely to regain 54- 54.50 level to the dollar in the coming week," Venkatesh said, adding exporters and corporates are selling dollars in the hope that any further depreciation of the currency will not happen.
Bank of Baroda Executive Director Sudhir Kumar Jain said the rupee is showing bias towards appreciation.
"The rupee is showing bias towards appreciation and recouping to 54 level will take 15-20 days against the greenback," he added.