Weakness in dollar against major rivals in overseas markets also helped rupee rally, forex dealers said.
At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed higher at 54.29 a dollar from previous close of 54.43. It improved further to a high of 53.96 on sustained dollar selling by exporters and some banks.
Capital inflows worth USD 130 million in stocks also boosted the rupee sentiment, said bankers.
Analysts said Obama's win was likely to ensure continuity in monetary policy in short term, after his challenger Mitt Romney expressed unease over the US Fed's quantitative easing programme where it increases dollar supply by buying bonds.
However, some late dollar demand from importers pulled rupee down to a low of 54.37 before settling at 54.20, still showing a rise of 23 paise or 0.42 per cent. This is biggest singe-day gain since October 22 when it rose 37 paise.
The dollar index, a gauge of six major global rivals, was down by 0.09 per cent after Obama won re-election, with traders tying the weakness to a increase in risk appetite and lower attraction to safe-haven assets like dollar.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said: "Obama winning the second term in US Presidential polls boosted the global risk mood, pushing dollar index lower."
However, the overall view is still bearish for the rupee and any 40-50 paise dip should be used as an opportunity by the importers to hedge their open exposures, said Abhishek Goenka, Founder & CEO, India Forex Advisors.
Meanwhile, the Indian stock market benchmark Sensex today closed up by 85 points, completing its straight six-day gaining string. (MORE)
