The rupee logged its first weekly gain in five weeks, adding 2% against the dollar during the week as the euro strengthened. On Thursday, the euro was trading at 1.3498 against the dollar, compared to its previous day’s close of 1.3461, while the dollar index dropped to 78.18 from 78.32 a day earlier in early trades.

The successful auction of new limits for foreign investors to invest in both gilts and corporate bonds, on Wednesday, has boosted the sentiment in the local currency market since approximately $10 billion is expected to flow in over the next three months.

Meanwhile, the euro gained on expectations that US jobs data, to be released on Friday, would be positive.

Gains in the domestic equity markets and the rise in the euro further boosted the sentiment.

The rupee on Friday gained 26 paisa, or 0.51% to close at 51.20/21, its highest level since November 17.

The currency has seen a retracement of more than 3% from its all-time low of 52.73 touched on November 22.

Pradeep Khanna, MD & head of forex, HSBC, said: ?There has been an improvement in the sentiment and all risky assets have gained in the last couple of days after the concerted action taken by major central banks of the world, to easy liquidity in the dollar market.?

Coordinated action taken by the world’s six major central banks, on Wednesday, to provide cheap dollar funding to help ease the euro zone crisis has triggered a rally in risky assets globally, which has also benefited the rupee. Forex dealers said that the rupee could appreciate further if supported by the euro.