The rupee is at near three-month high after the government hiked gold import tax. The unit rose to 53.41, a level last seen October 24; currently at 53.435/45 versus Monday's close of 53.765/775.
Gold import-related dollar buying is an important source of dollar demand after oil in currency markets.
Foreign bank dealer says net daily gold related USD demand is around $150-170 million and may reduce if gold prices do not go up.
India has raised the import tax on gold by 2 percentage points to 6 percent to curb purchases and rein-in a ballooning fiscal deficit, but industry officials expect only a moderate drop in demand.
Copyright Thomson Reuters 2013