Foreign funds continue to bring in dollar inflows and are making sizeable investments in the Indian markets. Despite this, there has been a sharp depreciation of the rupee in the last one week, due to persistent demand for dollars from oil importers.
The three month rupee forwards has crossed the Rs 52 mark, signalling a bearish trend.
Technically too, marketmen believe that the rupee looks weak. The Indian currency has been performing well since the beginning of the year, after having slipped to a low of Rs 54 in December, 2011.
Rising price of crude, which accounts for the the largest share of imports has been one of the main factors in the depreciation of the rupee. Oil prices have rallied almost 17%, with Brent now breaching the $125 per barrel mark in trading on Friday.