The rupee on Tuesday gained 20 paise to close at 51.47/48 against the US currency following smart rise in local equities on policy rate cut by the central bank and dollar selling by exporters.

Dollar selling by exporters on hopes of further fall in dollar value overseas helped the rupee rise, a dealer said.

The BSE benchmark index gained over 200 points to end at 17,357.94 points after RBI cut the policy rates by 50 basis points to shore up the flagging economy.

FIIs today invested about Rs. 441.15 crore in equities, according to provisional bourses’ data.

High-interest rate regime by RBI had fanned fears of funds outflows amid euro-zone debt crisis. The rate cut by RBI is expected to lower borrowing costs for businesses which would boost the domestic economy, a dealer said.

At the Interbank Foreign Exchange (Forex) market, the domestic unit opened slightly better at 51.63/64 from overnight close of 51.67/68 and immediately touched a low of 51.70 on early hesitancy in local stocks.

However, when the key rate cut by the apex bank filtered in, the equities bounced back which helped the rupee to gain.

The dollar index was down by 0.05 per cent in European market today while New York crude oil was trading below USD 104 a barrel.

The rupee was on a strong note tracking overnight gains in global equity markets and weakening dollar, Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said.

The rupee premium for the forward dollar settled further weak on sustained buying by exporters.

The benchmark six-month forward dollar premium payable in September ended lower at 152—154 paise from previous close of 158—160 paise and far—forward contracts maturing in March also concluded down at 278—280 paise from 288—290 paise.

The RBI fixed the reference rate for the US dollar at 51.6265 and for euro at 67.6546.

The rupee declined further to 82.09/11 against the pound sterling from overnight level of 81.83/85 while fell back against the euro to 67.63/75 from 67.31/33.

It, however, recovered against the Japanese yen to 63.80/82 per 100 yen from last close of 63.95/97.

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