The rupee soared by 62 paise to settle at a two-week high of 76.06 against the US dollar on Thursday tracking gains in domestic equities as hopes of another stimulus package from the government bolstered investor sentiment.
Forex traders said investor sentiment strengthened after the RBI said it would undertake additional purchase of government securities through open market operations (OMO).
At the interbank foreign exchange, the rupee opened higher at 76.31 rose further to the day's high pf 76.00. The rupee finally settled at 76.06 against the US dollar, registering a rise of 62 paise over its previous close. This is the highest closing level since April 7.
On Wednesday, the rupee had settled at 76.68 against the US dollar.
"On a review of current and evolving liquidity and market conditions, the Reserve Bank has decided to conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO) for Rs 10,000 crores each on April 27, 2020," the Reserve Bank said in a release.
The dollar index, which gauges the greenback's strength against the basket of six currencies, was trading 0.08 per cent up at 100.46.
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The 30-share BSE Sensex surged 483.53 points or 1.54 per cent to close at 31,863.08, a six-week high. The broader NSE Nifty advanced 126.60 points, or 1.38 per cent, to settle at 9,313.90.
Foreign institutional investors remained net sellers in the capital market, as they sold equity shares worth Rs 1,326.09 crore on Wednesday, according to provisional exchange data.
Brent crude, the global oil benchmark, rose 6.92 per cent to USD 21.78 per barrel.
"Indian rupee along with other Asia's emerging currencies edged higher as oil extended its recovery. Expectations of a one more stimulus package from US congress encouraged investors to return to some risky assets," said Devarsh Vakil, Head Advisory, HDFC Securities.
Moreover, expectations of foreign fund inflows and stronger equities also supported the domestic unit.
"Also, the World Health Organization said 83 coronavirus vaccines are in development globally, with six of them in human trials stage, boosted the sentiments," Vakil said. Forex traders further said market participants are also concerned that the sharp rise in coronavirus cases could weigh on the economy.
The number of cases around the world linked to the new coronavirus has crossed over 26.31 lakh. In India, over 21,300 coronavirus cases have been reported so far.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 76.8084 and for rupee/euro at 83.3832. The reference rate for rupee/British pound was fixed at 94.5117 and for rupee/100 Japanese yen at 71.41.
"Rupee ended at over two-week high on Thursday on likely overseas inflows into local stocks, while lower oil prices weighed down dollar demand," said Jateen Trivedi, Senior Research Analyst (Commodity & Currency) at LKP Securities.
After oil prices recovered, global equities surged, and local equities also traded higher, Trivedi said and added that 75.50 shall act a key trend level going ahead.