The Indian rupee is managing to catch a break from a precipitous sell-off that's dogged the currency in the past month, rebounding 4.4 percent against the U.S. dollar since plummeting to a fresh record low of near 69 last Thursday.
But foreign exchange strategists are skeptical the turnaround is sustainable, citing domestic economic fragilities, the risk of further capital outflows and the prospect of higher U.S. yields.
(Read more: Why the rupee may not be headed to 70)
"It's more of a short-term bounce; the measures last week announced by the RBI [Reserve Bank of India] have helped the rupee, resulting in less panic dollar buying. The delay in military action in Syria is also helping global sentiment. But the rupee still remains vulnerable," Mitul Kotecha, head, Foreign Exchange Strategy at Credit Agricole told CNBC on Monday.
Last Wednesday, the RBI said it was providing a special window with immediate effect to sell U.S. dollars to three state-run oil companies – a measure aimed at reducing a major source of dollar demand from the spot market.
(Read more: India swamped by a wave of growth downgrades)
"The RBI is just changing the mechanism for dollar buying, it doesn't alter demand. It doesn't change the inherent issues weighing upon the rupee in the first place," Kotecha said. "The risk is to move back to recent highs near 70 – at which point we will likely see more measures announced by the RBI."