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Building on Wednesday's massive gains, the rupee on Thursday soared by 34 paise to end at a fresh 3-month high of 66.85 against the US dollar on frantic selling of the American currency by exporters and banks.
This is the highest closing since November 10 last year.
Robust dollar inflows into equities and easing Fed interest rate hike speculation largely kept forex market sentiment buoyant a day after the Reserve Bank of India (RBI) kept its policy rates on hold.
The domestic currency was further supported by an unwinding of long dollar positions by speculators and exporters despite firm overseas trend.
The rupee opened firmly higher at 67.04 as compared to an overnight close of 67.19 at the Interbank Foreign Exchange (forex) market.
It soon breached the significant 66-barrier to hit an intra-day high of 66.84 on sustained dollar unwinding before concluding at 66.85, showing a solid gain of 34 paise, or 0.51 per cent.
In worldwide trade, the greenback was down a tad as lingering risk aversion pinned US bond yields near multi-week lows amid cooling Fed rate hike hopes.
The US dollar index was trading higher at 100.30 in the late afternoon session.
The RBI fixed the reference rate for the dollar at 67.0123 and for the euro at 71.5423.
In cross-currency trade, the rupee softened further against the British pound to settle at 83.88 from 83.87.
However, the home unit strengthened further against the euro to close at 71.39 from 71.52 and also firmed up further against the Japanese Yen to end at 59.45 per 100 yens from 59.86 earlier.
