Extending its gains for the second straight day, the rupee surged by 30 paise on Tuesday against the American currency to hit a two-week high at 63.74 on selling of the greenback by banks and exporters on the back of lower dollar in the overseas market.
Fresh foreign capital inflows into equity market also boosted the rupee value against the dollar, a forex dealer said. They bought shares worth Rs 350.41 crore on Monday as per the provisional figure issued by stock exchanges.
The rupee resumed lower at 64.09 per dollar as against the on Monday's closing level of 64.04 at the Interbank Foreign Exchange (Forex) Market on initial dollar demand from banks on the back of overnight gains in the US market.
However, it recovered immediately to end at 63.74, showing a gain of 30 paise or 0.47%.
It has gained by 39 paise or 0.61% in two days.
The domestic unit moved in a range of 64.10 and 63.74 per dollar during the day.
The dollar index was down by 0.15% against a basket of six currencies in the late afternoon trade.
Oil prices edged up in Asian trade following a 5% fall in the previous session as high global production and a weakening economic outlook, especially in Asia, prompted analysts to caution further falls.
In New York, the dollar finished the first trading session of the month higher against its main rivals, retaining gains from the early session despite a disappointing reading of the US manufacturing in July.
Meanwhile, the benchmark 30-share index snapped its four-day wining spree and tumbled by 115.13 points 0.41% on Tuesday.
Meanwhile, the Reserve Bank on Tuesday kept its policy rates unchanged, with Governor Raghuram Rajan saying that the headline inflation is at elevated levels and banks are yet to pass on the full benefits of previous rate cuts.
In the forward market, the premium for dollar moved up on fresh paying pressure corporates.
The benchmark six-month premium payable in January moved up to 217-219 paise from 216.50-218.50 paise on Monday and far-forward contracts maturing in July 2016 also firmed up to 444-446 paise from 440-442 paise.
The RBI fixed the reference rate for the dollar at 63.9315 and for the Euro at 70.0497.
The rupee firmed up further against the pound sterling to close at 99.45 from 99.73 on Monday and moved up against the Euro to 70.02 from 70.18.
It also looked up against the Japanese currency to 51.42 per 100 yen from 51.55 previously.