The rupee posted its biggest single-day gain in nearly two months on Thursday, after hitting the highest level in more than two weeks after the U.S. Federal Reserve's September policy meeting minutes suggested it was in no hurry to raise interest rates.
The dollar fell to a three-week low against the yen, as investors cut favourable bets after minutes of the U.S. Federal Reserve's last meeting prompted many to push out expectations for the likely timing of an interest rate rise.
The index of the dollar against six major currencies was down 0.22 percent with most Asian currencies also rallying against the greenback.
“The dollar took quite a beating and we saw domestic equities rally, both together helped the rupee gain,” said Naveen Raghuvanshi, a foreign exchange dealer with DCB Bank.
“We could see the pair touch 60.80 going by technicals but there is good state-run bank buying around 61 levels. Broadly the near-term range is likely to be 60.80 to 61.40/45,” he added.
Traders are now awaiting retail and wholesale inflation data and factory output data due to be released next week for domestic cues.
The partially convertible rupee closed at 61.04/05 per dollar compared with 61.3950/4050 on Thursday. The rupee touched 60.9025 earlier, its strongest level since September 23. The rupee gained for a fourth straight day, rising 0.6 percent, its biggest single-day gain since August 14.
Gains in the domestic share market also helped with good dollar selling seen by custodian banks.
Indian shares rose 1.5 percent, snapping a three-day losing streak, as hopes the Federal Reserve would not rush into raising U.S. interest rates boosted heavyweight banks and blue chips such as Bharat heavy Electricals Ltd.
Traders will continue to monitor shares for clues on the direction of foreign fund flows. Foreign funds have bought a net $13.95 billion in equities and $20 billion in debt so far in 2014.
In the offshore non-deliverable forwards, the one-month contract was at 61.35 while the three-month was at 61.95.
