The rupee on Tuesday appreciated further by 32 paise to settle at 49.50/51 against the U.S. currency following sustained dollar selling by exporters and sharp rise in local equities.
Dollar weakness overseas and fresh capital inflows too boosted the rupee outlook.
At the Interbank Foreign Exchange (Forex) market, the domestic unit opened higher at 49.67/68 a dollar from previous close of 49.82/83 and touched a low of 49.80 in morning deals after some weakness in stocks following the news of rise in the key interest rates announced by the central bank.
However, the rupee bounced back on smart recovery in equities as well as sustained dollar selling by exporters on expectations of fall in dollar value overseas.
On Monday, it had gained 19 paise or 0.37 per cent.
The BSE benchmark Sensex shot up by 315.58 points or 1.86 per cent, which mainly supported the rupee rise.
The forex market will remain closed on October 26 and 27 on account of Diwali festival.
The U.S. dollar fell in the New York market on Tuesday to its lowest level since early September against the euro, following a report that Germany is willing to leverage Europe’s bailout fund to more than €1 trillion, or about $1.39 trillion.
The dollar index, a gauge of six major currencies, was down by nearly 0.2 per cent while New York crude oil was trading above $94 a barrel in European market on Tuesday.
FIIs injected $29.43 million on October 24 after pulling out $122.28 million in last two trading sessions as per Sebi data.
Meanwhile, the RBI on Tuesday raised the repo rate (at which RBI lends money to banks) and the reverse repo (a rate at which banks park their funds with RBI) to 8.5 per cent and 7.5 per cent respectively in its monetary policy review while on the economic growth, RBI lowered its forecast to 7.6 per cent for the current fiscal, down from its earlier projection of 8 per cent.
The rupee premium for the forward dollar ended slightly lower on stray receivings by exporters.
The benchmark six-month forward dollar premium payable in March finished weak at 89-91 paise from Monday’s close of 91-1/2-93-1/2 paise and far-forward contracts maturing in September also declined to 141-143 paise from 143-1/2-145-1/2 paise previously.
The RBI fixed the reference rate for the U.S. dollar at Rs. 49.6598 and for the euro at Rs. 69.1510.
The rupee improved further against the pound sterling to end at Rs. 79.20/22 from last close of Rs. 79.38/40 while recovered against the Japanese yen to Rs. 65.01/03 per 100 yen from Rs. 65.45/47 previously.
It, however, softened to Rs. 68.97/99 per euro from last close of Rs. 68.96/98.