Mumbai: After its brief overnight pause, the rupee today again bounced back to end at a fresh 2-1/2 year high of 63.41, gaining by 12 paise against the US dollar on optimism over a brightening economic picture.
This is the highest closing for the rupee since July 15, 2015 when it had finished at the same level.
The domestic currency largely withstood the initial wobble post-FOMC minutes release and flaring crude prices globally.
The rupee tumbled to a low of 63.62 intra-day before staging a remarkable recovery towards the fag-end.
Expectations over healthy capital flows against the backdrop of growing optimism surrounding the economy added further bullishness to the ongoing rally.
Forex sentiment also got a boost after a monthly survey showed the Indian services sector returned to growth in December as new orders broadly stabilised.
A breathtaking rally in domestic equities too weighed on the forex trading front.
The domestic currency is witnessing burst of strength since the beginning of this year after a stellar 2017.
Earlier in the day, the rupee resumed lower at 63.59 as compared to overnight close of 63.53 at the Interbank Foreign
Exchange (forex) market on bouts of dollar demand.
It weakened further to touch a low of 63.62 in mid- morning deals before rebounding sharply.
After hitting session's high of 63.36, the local unit traded in a narrow range most part of the day as fresh dollar purchases by a large state-run bank, likely on behalf of the central bank acted as a tough resistance for the domestic currency before ending at 63.41, showing a good gain of 12 paise, or 0.19 per cent.
Meanwhile, oil rose further above USD 68 a barrel on early Asian trading - its highest since May 2015, supported by unrest in Iran that has raised concerns about supply risks.
Brent crude, an international benchmark, is trading at USD 67.92 a barrel in early Asian trade.
Domestic bourses staged a spectacular comeback after a three-session lustreless trade - marking its first rally in new year as recently beaten down metal, capital goods and consumer durables stocks lured bargain hunters amid bullish global cues.
Asian stocks also ended higher running with a stronger Wall Street lead even European stock markets are adding their support to a global equities rally, taking Londons FTSE 100 to a new record high.
The benchmark Sensex rebounded over 176 points to end at 33,969.64, while Nifty rose nearly 62 points to 10,504.80.
The dollar index, which measures the greenback's value against a basket of six major currencies, was up at 91.62 in early trade.
The dollar bounce short-lived despite news of stronger manufacturing data and a set of Federal Reserve policy meeting minutes which looked tentatively towards at least some tax-cut related boost for growth.
In cross-currency trades, the rupee recovered against the pound sterling to settle at 85.89 per pound from 86.15 and the Japanese yen also recouped sharply to finish at 56.31 per 100 yens from 56.61 earlier.
The home unit, however, fell back against the euro to end at 76.39 compared to 76.32 yesterday.
Elsewhere, the common currency euro maintained its soft tone against the US dollar despite stronger-than-expected PMI - its highest reading since February 2011.
The pound sterling edged higher following supportive UK data.
In forward market today, premium for dollar was up marginally owing to mild paying pressure from corporates.
The benchmark six-month premium payable in June gained to 134.50-136.50 paise from 134-136 paise and the far forward December 2018 contract also inched up to 270.50-272.50 paise to 270-272 paise on Thursday.