In volatile trade, the rupee strengthened for the second straight day on Monday closing 23 paise higher at 55.52 a dollar on robust capital inflows and strong stock markets amid exporters selling the U.S. currency.

At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed sharply higher at 55.35 a dollar from last Friday’s close of 55.75 and improved further to a one-week intra-day high of 55.24.

After giving up some morning gains, it settled for the day at 55.52, up 23 paise over Friday’s close.

Dealers attributed early smart rise in rupee to local stocks amid sustained buying by foreign funds.

After injecting over Rs 3,500 crore last week, FIIs pumped in Rs 555.73 crore today as per provisional data with stock exchanges.

Finance Minister P Chidambaram today said: “Volatility of the exchange rate has reduced in recent weeks. A reassurance on the investment climate, continued inflow of remittances, and a rise in capital flows — both FDI and FII — will bring further stability to the exchange rate“.

However, some early gains in rupee were frittered away in the second half of the trading session after the euro eased.

Some investors raised doubts over the action promised by European policymakers to resolve the Eurozone debt crisis, said dealers. The euro’s losses lifted the dollar against a basket of currencies. The dollar index was up 0.2 per cent.

““Rupee took cue from the Euro today, moving in tandem with the European currency. However, domestic factors like Finance Minister’s speech on economy lifted sentiment and supported the domestic currency,” N S Venkatesh, Head of Treasury, IDBI Bank said.

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