The rupee recovered smartly and hit a fresh nine-year high of 40.34 against the US currency in morning trading, boosted by heavy capital inflows and higher dollar premium in forward market.
In fairly active trade at the Interbank Foreign Exchange (forex market), the Indian unit resumed higher at 40.38/39, a dollar from Wednesday, close of 40.40/41 and later touched the 40.34 level before being quoted at 40.3700/3750 in late morning deals.
Attributing the rupee's surge against the greenback to a surge in dollar premiums and heavy foreign investment flow, forex dealers said the market also witnessed some dollar selling by exporters.
Traders, however, anticipated some moves by the central bank to intervene in the exchange market as the rupee has appreciated further against the US unit.
Weakness in overseas dollar also contributed to the rupee's turnaround, they added.
In New York market, the dollar hit an all-time low against the euro on Wednesday for the second consecutive day.