Forex dealers said weakening of the US currency against the euro overseas and a recovery in local equities also favoured the rupee sentiment. The local currency started the day at a firm note at 53.55 from Tuesdays close of 53.77 at the Interbank Foreign Exchange (Forex) market.
It moved in a range of 53.28-53.60 before settling for the day at 53.30, a gain of 47 paise, or 0.87%. Previously, rupee had ended at 52.87 on October 17, 2012.
Rupee continued its upward movement today mainly buoyed by the rate cut by RBI, which has created some sense of optimism in the markets. Also, exporters are on a dollar selling spree as they are expecting this to be the peak for the local unit, IDBI Head (Treasury) NS Venkatesh said.
The rupee had gained 14 paise on Tuesday, after RBI cut its short-term lending (repo) rate and cash reserve ratio by 0.25%, pumping in a liquidity of R18,000 crore into the system. Venkatesh said a recovery in local stocks and hopes of higher foreign fund inflows also aided the rupee, adding that it will strengthen to 52-level against dollar by March-end. The dollar index was down by 0.24% against a basket of six major currencies ahead of the policy announcement from US Federal and US growth data.
Euro strengthening to 1.35-1.44 also worked in rupees favour, Venkatesh said. Foreign institutional investors on Wednesday pumped in over $170 million (R906.36 crore) into local equities on Wednesday, according to provisional BSE data.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India), said, Rupee has hit a 13-week high tracking gains in euro and other highly traded currencies against the US dollar.