The rupee ended higher by 13 paise against the dollar on Thursday as the markets responded positively to the various steps announced by the Reserve Bank of India (RBI) to ramp up forex inflows.

At the inter-bank forex markets, the local currency closed at 79.17 against the greenback against the previous close of 79.30 after opening strong at 79.05. Experts are still cautious with the rupee rising further on the back of the measures taken by the RBI as the US Federal Reserve continues to tighten its monetary policy amid dollar outflows from the emerging markets to safe-haven assets.

"The forex reserves remain at a healthy level and incremental flows from the RBI measures aim at bolstering it further.

While we are cautious on the amount of incremental flows, we see these measures as being preemptive in capping any sharp depreciation bias and reducing volatility in the rupee,’’ a note from Kotak Economic Research said.

An argument is now being put forward to internationalise the rupee that should lessen the demand for dollars and shore up the Indian currency.

An SBI research report has suggested the RBI should make an effort to internationalise the Indian currency: non-residents can then use the rupee for trades or other transactions.

For instance, an importer from a particular country can source items from another nation using the rupee. ``The RBI should make a conscious effort to internationalise the rupee. The Russia-Ukraine war and the disruptions to payments caused by it is a good opportunity to insist on export settlement in rupee, beginning with some of the smaller export partners,’’ the SBI report said.

In March, Soumya Kanti Ghosh, group chief economic adviser, SBI said countries proposing rupee-rouble trade to bypass the sanctions against Russia provided an opportunity for the internationalisation of the domestic unit.

“The hegemony of the dollar is likely to continue in the next few decades, notwithstanding the alternate settlement mechanism being envisaged by select nations, circuiting around the western sanctions as backdoor talks gather momentum for rupee-rouble or yuan-rouble settlements globally, with some enthusiasts betting for gold settlements too,” Ghosh had then said.

Though the RBI in the past recognised that such internationalisation is “inevitable”, it also sounded a note of caution.

In its report on currency & finance last year, the apex bank said it would make the simultaneous pursuit of exchange rate stability and domestically oriented monetary policy more challenging, unless supported by financial markets that could effectively absorb external shocks.

Fed rate plans The US Fed is steering toward another three-quarter-point interest rate increase later this month even as recession fears mount.

Minutes from the Fed’sJune meeting, released Wednesday, made it clear that officials are eager to move rates up to a point where they are weighing on growth as policymakers ramp up their battle against inflation.

The Fed will announce itsnext rate decision on July 27.

Additional reporting by NYTNS