The rupee extended its gains against the American currency for the second consecutive day, surging 23 paise to end at nearly three-week high at 61.97 Wednesday on Budget optimism and sustained dollar selling by banks.
Good foreign capital inflows also helped the rupee maintain its gains at closing, forex traders said. The rise comes ahead of the Union Budget on Saturday that is expected to be a platform for more reform initiatives and growth measures.
The rupee resumed higher at 62.06 per dollar as against the yesterday's closing level of 62.20 per dollar at the Interbank Foreign Exchange (Forex) Market. It further firmed up to 61.95 on sustained selling of dollars before ending at 61.97 per dollar, showing a gain of 23 paise or 0.37%.
The local currency has mow gained by 34 paise or 0.55% in two sessions. The closing value of the rupee is near three week highs. It had ended at 61.69 per dollar on February 6, 2015.
Pramit Brahmbhatt, Veracity Group, CEO said, "The optimism over the upcoming Budget influenced trading sentiments and helped indices to trade strong during the day which supported the upward movement of the rupee. The trading range for the spot USD/INR pair is expected to be within 61.60 to 62.40."
The dollar index was down by 0.20% against a basket of major global rivals.
The dollar extended losses against the yen in Asian trade today, after overnight remarks by Federal Reserve chief Janet Yellen surprised on the dovish side, analysts said.
In the New York market, the dollar inched lower against the yen and euro after Yellen suggested the central bank's first rate hike since 2006 may not occur until the second half of the year.
Meanwhile, the Indian benchmark Sensex ended marginally higher by 3.33 points of 0.01% at 29,007.99. The forward premia firmed up on paying pressure from corporates.
The benchmark six-month premium payable in July moved up to 204.5-206.5 paise from yesterday's level of 202-204 paise. Forward contracts maturing in January 2016 also rose to 422.5-424.5 paise from 416-418 paise. The Reserve Bank of India fixed the reference rate for dollar at 62.0468 and for Euro at 70.4293.
The rupee declined further against the pound to 96.07 per pound from 96.01 previously while recovered against the euro to 70.30 from 70.45 paise yesterday. However, it declined to 52.16 per 100 yen compared to 52.04 previously.