New Delhi: The Finance Ministry Wednesday said the rupee will correct itself against the dollar and the valuation of the currency on the longer term will depend on the capital inflows.
"The rupee will correct itself, basically it is the euro, how euro behaves vis-a-vis dollar also impacts us...It (rupee value) also depends on what kind of inflows we are attracting," Department of Economic Affairs Secretary Arvind Mayaram told reporters here.
The rupee has been depreciating since last month. In the past two weeks, especially have not been so good for the rupee, which has slipped below the Rs 54 levels last week.
The rupee was trading at 54.19 against the dollar in noon trade, against its previous close of 54.43.
The rupee advanced by 24 paise to 54.19 against the US currency on selling of dollars by banks and exporters after the greenback weakened against major world currencies.
Dealers said dollar slipped against the euro and yen after President Barack Obama was re-elected in the US Presidential election. They added that dollar fell on expectations that under Obama the Federal Reserve would continue with the loose monetary policy.
Expectations of persistent capital inflows from foreign funds into equity market also boosted the rupee value against the dollar, a dealer said.
The dollar slipped in Asian trade today. The European single currency bought USD 1.2860 in Tokyo, well up from USD 1.2788 earlier on Wednesday.
Foreign Institutional Investors (FIIs) have been net buyers in equities and have invested over USD 18.3 billion so far in the current year. In November alone, they have invested about USD 350 million.
According to Bank of America Merrill Lynch report, the rupee is likely to see some strengthening and is expected to touch 51 level against the US dollar by December.
The Indian currency has depreciated 18.5 percent, second only to Brazil, since September 2011.