The rupee rose to its highest in nearly two months on Monday, extending gains into a third straight session, as a falling dollar encouraged buying in the local unit and buoyant equities raised hopes of capital inflows.
The partially convertible rupee ended at 47.635/645 per dollar, off an intraday peak of 47.63 -- its highest since June 12, and about 0.6 per cent stronger than Friday's close of 47.93/95.
"The dollar's fall had a significant impact on the rupee's rise on Monday. We would see the rupee in the 47.50-47.70 range on Tuesday," a senior trader at a foreign bank said.
The dollar hit its lowest level in 2009 on Monday as solid banking earnings and a UK survey showing manufacturing activity unexpectedly expanding boosted the view that the global economy is over the worst.
Higher share prices also bolstered sentiment in favour of the local unit, traders said.
The main share index climbed 1.6 per cent on Monday to its highest close in 14 months, led by energy giant Reliance Industries. Traders said the market picked up steam after European markets rose to a new high this year on encouraging news from banks.
Foreign funds have bought almost $7.5 billion worth of shares this year, following net sales of more than $13 billion in 2008.
One-month offshore non-deliverable forward contracts were quoting at 47.64/74, little changed from the onshore spot rate.