With the Finance Ministry late last night announcing the draft guidelines on the much-feared General Anti-Tax Avoidance Rules (GAAR) giving clarity to foreign investors, the rupee, tracking robust stock market opening, resumed strong at 56.55 at the Interbank Foreign Exchange (Forex) market.
With FIIs pumping over Rs 3,000 crore today in shares, the huge dollar supply vaulted the rupee to a intra-day high of 55.60 before concluding at 55.61, a net rise of 119 paise or 2.10 per cent compared to yesterday's close of 56.80. The rupee was the best-performing currency in Asia today.
The previous two biggest single-day gains since 2003 were 124 paise rise on September 22, 2011 and before that 119 paise jump on November 12, 2008.
"The positive outcome of the EU summit which opted ways for long-term solutions to the ongoing Eurozone crisis and the reformative steps taken up by the PM to attract larger dollar inflows kept the rupee on front foot throughout," said Pramit Brahmbhatt, CEO, Alpari Financial Services (India).
Also, some clarity coming out of GAAR provisions also lifted the sentiment, said N S Venkatesh, Head of Treasury, IDBI Bank.
The rupee's gain comes after 25 per cent slide in one year , which saw it plummetting to all-time low of 57.3 last week.
Forex traders said a steep fall in the US currency overseas against the euro as well as other major rivals after European Union leaders agreed to employ measures aimed at stabilising Spanish and Italian bond markets and establish a Eurozone-wide banking union also supported rupee's gains.
The euro soared more than 1.2 per cent to a high of USD 1.2628, its biggest daily rise in eight months. The yen was also trading stronger at 79.4 per dollar. According to Brahmbhatt, the sharp fall in dollar index along with the positive sentiments in global markets aided the rupee to strengthen against dollar.
The dollar index was down by a sharp 0.9 per cent against a basket of six major currencies and the New York crude oil was trading above USD 80 a barrel in Europe today.
Abhishek Goenka, Founder and CEO, India Forex Advisors said,"The rupee was little oversold in the last few days and a technical correction around 55.50 seems possible."
Going ahead, rupee can pull back to 54.50 level a dollar in the coming weeks, Hemal Doshi, Currency Strategist, Geojit Comtrade said.
The premium for the forward dollar moved down further slightly on sustained receivings by exporters.
The benchmark six-month forward dollar premium payable in November softened to 151-152 paise from Thursday's close of 152-154 paise.
The premium for far-forward contracts maturing in May also declined to 297-299 paise from 301-303 paise.
The RBI fixed the reference rate for the US dollar at 56.3090 and for euro at 70.9080.
The rupee zoomed further against the pound sterling to end at 86.78 from overnight close of 88.41 and also shot up to 69.93 per euro from 70.72 previously.
It too hardened further against the Japanese yen to 69.95 per 100 yen from last close of 71.55.