The Indian rupee rose to a two-week high on Monday after the Reserve Bank of India said it would provide foreign exchange to oil refiners, a move analysts said would reduce dollar demand in the currency market.

At 9:28 a.m., the partially convertible rupee was at 42.22/23 per dollar, half a percent stronger than Friday's close of 42.45/46, after rising as high as 42.15, a level it last tested in mid-May.

After the market closed on Friday, the central bank said it would conduct open market operations in the secondary market in oil bonds held by state-run oil companies to provide liquidity to crude refiners.

"This is definitely having an impact on the market as the oil guys are the biggest dollar buyers and any move to check their demand is rupee positive, at least in the short term," said a trader at a foreign bank.

India imports a majority of its oil and refiners have been very active in the past few weeks, pushing the rupee down to a 13-month low of 43.21 on May 22.

JPMorgan advised all its clients to liquidate any positions that would have benefited from continued rupee weakness and estimated the central bank may end up providing as much as $12 billion in support to oil refiners via this facility.

Sentiment for the rupee has also been buoyed after the government raised foreign investor limits in local debt markets and allowed firms to borrow more funds overseas last week.

One-month offshore non-deliverable forward contracts were quoting at 42.21/31.