In a much-awaited reform, the government recently announced two important fuel reforms to deregulate diesel prices and a hike in natural gas prices.
Increased selling of dollars by banks and exporters amid soaring equity markets on sustained buying by foreign investors also supported the rupee, dealers said.
Besides, dollar's weakness against other currencies overseas also supported the rupee, they added.
The rupee surged by 5 paise to close at over one-week high of 61.31 against the dollar in yesterday's trade on sustained selling of the greenback by banks and exporters in view of strong equity market and capital inflows.
Meanwhile, the benchmark BSE Sensex surged 212.76 points, or 0.80 per cent, to trade at 26,788.41 in early trade.