Fresh dollar selling by exporters and a weak American currency in the overseas markets also aided the rupee rise.

The rupee on Friday bounced back by 49 paise to a three-week closing high of 61.93 against the US dollar, tracking a smart rise in stocks after wholesale inflation fell to an eight-month low.

Fresh dollar selling by exporters and a weak American currency in the overseas markets also aided the rupee rise.

At the Interbank Foreign Exchange market, the rupee commenced strong at 62.25 a dollar from the previous close of 62.42. It, however, fell back to a low of 62.37 on weakness in local stocks around noon and dollar demand from importers.

A smart rebound in share markets on late buying and renewed dollar selling by exporters helped the rupee to rise to a high of 61.92, before settling at 61.93, a rise of 49 paise or 0.79 per cent. On Thursday, it had tumbled by 32 paise or 0.52 per cent.

Friday’s 49 paise gain is the best since January 28 (59 paise) while the closing level matches 61.93 on January 23.

Compared to last Friday, the rupee gained 35 paise, its second successive weekly gain.

Pramit Brahmbhatt, CEO, Alpari Financial Services, (India) said: “Rupee appreciated as January WPI inflation easing helped local equity markets to close on a positive note. Dollar index continued to trade weak. The trading range for the USD/INR pair is expected to be within 61.50 to 62.80.”

The equity benchmark S&P BSE Sensex on Friday shot up by 173.47 points, or 0.86 per cent, on fall in wholesale inflation to an eight-month low of 5.05 per cent in January.

The dollar index was down by 0.18 per cent against its major global rivals as reports said US retail sales disappointed and investors cheered the euro zone economy expanding more than forecast in the final quarter of 2013.

The encouraging data has eased pressure on the European Central Bank to take action in March to counter low inflation and boost growth, said forex traders.

More In: Markets | Business