Forex dealers said besides continued selling of the greenback by banks and exporters, strong foreign fund inflows and a higher opening of the domestic equity market backed up the rupee.
The Indian rupee continued to rule firm against the American currency for the fourth day, moving up by another 20 paise to close at a fresh three-week high of 66.77 on sustained selling of dollars by banks and exporters amid strong recovery in domestic equities.
Expectations of more foreign capital inflows in view of robust domestic equities boosted the rupee value against the dollar, a forex dealer said.
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The BSE benchmark Sensex bounced back by 232.22 points to close above the 27,000-level after a gap of over 7 months at 27,009.67 on fresh buying mainly in interest-based counters as the Reserve Bank kept its key policy rate unchanged and indication of a rate cut in near future.
The Indian rupee resumed higher at 66.92 as against the last closing level of 66.97 per dollar at the Interbank Foreign Exchange (Forex) market and hovered in a range of 66.72 and 66.94 before finishing at 66.77, showing a gain of 20 paise or 0.30 per cent.
The domestic currency had last closed at 66.77 per dollar on May 13, 2016.
The Indian rupee has gained by 68 paise or 1.01 per cent in four days.
Meanwhile, the dollar index was down by 0.12 per cent against the basket of six global currencies.
Meanwhile, the RBI fixed the reference rate for the dollar at 66.8305 and euro at 75.9194.
In cross-currency trades, the Indian rupee dropped against the pound sterling to end at 97.40 from 96.98 yesterday while recovered against the euro to 75.78 per euro from 75.99.
The domestic currency also moved up against the yen to 61.97 per 100 yens from 62.50 yesterday.