Rising for the first time in three sessions, the rupee today appreciated by 16 paise to close at 54.22 on renewed dollar selling by banks and exporters and strong capital inflows amid hopes of a rating upgrade.
Weakening of the US currency overseas and firm local equities also boosted the rupee sentiment, forex dealers said.
FIIs today lapped up domestic stocks in full force and pumped in a whopping Rs 1,449.70 crore, or USD 267.37 million, according to BSE provisional data.
Rupee resumed higher at 54.18 per dollar against the last closing level of 54.38 at the Interbank Foreign Exchange (Forex) market and hovered in a range of 54.11-54.26 before ending at 54.22, up 16 paise, or 0.29 per cent.
Forex dealers said positive comments by Economic Affairs Secretary Arvind Mayaram, who met with representatives of rating agency Standard and Poor's earlier in the day and exuded confidence that that global agencies will upgrade the country's sovereign rating, also boosted the market sentiment.
"I think there is a case for an upgrade because we have taken the kind of decisions that most of countries in the world have not been able to take. This country has shown its determination to put the economy back on track. We believe it will happen and there is no doubt about it," Mayaram said.
In London, the British pound rallied against most major currencies in early trade.
At the same time, the US dollar fell against the Japanese yen today, sticking below the yen 100 level and the euro traded near the USD 1.30 level against the dollar.
"The rupee was seen trading stronger against the US dollar helped by the positive stock markets. Globally, the weakness in the dollar index and a recovery in the euro above USD 1.3050 levels contributed to the gains in rupee," said Abhishek Goenka, founder and CEO, India Forex Advisors.
Meanwhile, the BSE benchmark Sensex rose by 227.49 points to 19,406.75.
