The Indian rupee closed at 93.69 per dollar on Wednesday, its strongest level since April, as foreign investors kept buying Indian stocks and dealers sold dollars across the market. The currency gained 0.26% from Tuesday's close of 93.94, according to Business Standard.

For investors in Asia, the move stands out because it came on a day when the dollar strengthened against most regional currencies. Only the South Korean won, up 0.72%, did better among major Asian currencies. The Indonesian rupiah fell 0.48% and the Philippine peso lost 0.49%, while the Chinese yuan and Taiwan dollar edged up 0.10% and 0.02%.

The dollar firmed after U.S. inflation data came in hotter than expected and Federal Reserve officials made hawkish comments. Traders are now pricing in a 25-basis-point Fed rate increase in December, Business Standard reported, with a small chance of a 50-basis-point move. That would normally weigh on emerging market currencies. A dealer at a state-owned bank told the newspaper that equity inflows had offset the pressure.

Foreign money returns to Indian stocks

Overseas investors have bought nearly $6 billion of Indian equities so far in November, their largest monthly purchases since September 2024, according to Business Standard. In the first week of the month alone they bought more than $4 billion, Kotak Neo reported. The buying has also lifted the Sensex and Nifty.

Oil has helped too. India imports nearly 90% of its crude, and Brent fell almost 20% last week after U.S. President Donald Trump signaled that further strikes on Iran were unlikely while talks continue, Kotak Neo said. A smaller oil bill means less dollar demand from refiners and other importers.

The recovery has been quick. The rupee hit a record low of 96.96 per dollar in May and came close to that level again in October. It has gained 1.35% so far in November, 2.28% this quarter and 1.19% in the fiscal year that began in April, Business Standard calculated. It is still down 4.07% in calendar 2026 and 5.47% over the past 12 months.

Anindya Banerjee, head of currency and commodities research at Kotak Neo, said on Monday that the dollar's break below its earlier 94-to-97 range had improved the rupee's outlook. He named 93.20 and 92.50 as the next levels to watch, as long as the dollar does not close above 94.20.

How far will the RBI let it run

Bankers are now asking where the Reserve Bank of India will step in to buy dollars, Reuters reported on Monday. The central bank has two reasons to soak up inflows. India's foreign exchange reserves are $68 billion below their peak, and the RBI's net short dollar position in the forward market reached a record of nearly $240 billion in September, leaving it with large future dollar commitments. Analysts have argued that the forward book could cap the rally.

Madhavi Arora, an economist at Emkay Global, told Reuters she expects the RBI to use sustained inflows to rebuild reserves rather than allow a sharp appreciation. The forward position and India's ongoing need to fund its current account deficit are likely to limit the rupee's gains, she said.

The RBI's recent measures have also eased a mismatch in the currency market, where importers' demand for dollars had been running ahead of exporters' supply, according to Reuters.

Bonds move the other way

Indian government bonds did not share the rupee's strength on Wednesday. The yield on the benchmark 10-year bond rose 6 basis points to 7.21%, and the five-year yield climbed 4 basis points to 6.89%, Business Standard reported. Dealers blamed the sharp rise in U.S. Treasury yields after the inflation data, along with short positions traders had built ahead of Friday's weekly government bond auction.

"Traders have built short bets in the 10-year bond ahead of the weekly auction," a dealer at a primary dealership told Business Standard.

The next test comes Thursday, when India publishes consumer price inflation for October. A reading above forecasts could shift expectations for the RBI's interest rate path. After that, traders will watch Friday's bond auction and whether foreign equity buying holds above the $6 billion mark for the month.