The rupee may see sharp appreciation on the back of measures taken by the Reserve Bank of India (RBI) and the government as the decline was largely driven by "fear trade", analysts at Credit Suisse said in a note on Friday.
The bank says the rupee can reach 57-58 levels though the apex bank may try to stem the volatility by starting to build reserves at 60.
The resumption of foreign capital inflows could also lead to a significant balance of payment surplus and help the rupee, the investment bank said.
"The 30th September dollar/rupee level will thus be important: if dollar/rupee goes back to 60 by then, the translation impact will be near zero as dollar/rupee was 59.40 on 30th June, but mispriced import and export hedges or complex currency derivatives are likely to get exposed," the analysts wrote.
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