The rupee on Monday staged a smart rebound by recovering 10 paise against the US dollar to end at 66.71 on fresh selling of the American currency by corporates and banks.
Robust capital inflows into equities and debt predominantly supported the domestic currency even as forex market continued to price in a rate rise by the US Federal Reserve next week.
The local currency also benefited from a strong rally in local equities as well as subdued greenback overseas.
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Indian equities made a strong comeback to hit multi-year highs following a broad-based buying spree despite heightened geopolitical worries after North Korea reportedly launched a series of missiles.
Foreign funds made a net investment of Rs 1,528.48 crore last Friday as per the provisional figures issued by exchanges.
The home unit resumed higher at 66.77 from the weekend closing value of 66.81 at the Interbank Foreign Exchange (forex) market.
It largely moved in a tight range of 66.6950 and 66.78 throughout the day before ending at 66.71, showing a gain of 10 paise, 0.15 per cent.
Meanwhile, the greenback slipped a little against its major trading rivals despite hawkish statement by US Federal Reserve Chair Janet Yellen last Friday, which reiterated a rate increase would come at the close of its two-day meeting on March 15.
The US dollar index was trading marginally weak at 101.64 in late afternoon session.
The RBI fixed the reference rate for the dollar at 66.7559 and for the euro at 70.7346.
In cross-currency trade, the rupee, however, fell back against the British pound to end at 81.76 from 81.65 and drifted against the euro to finish at 70.59 as compared to 70.44.
It also dropped against the Japanese Yen to conclude at 58.62 from 58.34 last Friday.
Meanwhile, country’s foreign exchange reserves increased by USD 63.7 million to USD 362.79 billion for the week ended February 24.
Domestic equities witnessed a spectacular rebound after a two-session lacklustre trade following strong buying activity across the sectors except IT and pharma shares even as heavyweight Reliance Industries continued its strong rally.
The benchmark Sensex shot up over 215 points to end at 29,048.19, while broader Nifty jumped 65.90 points at 8,963.45.
In the forward market, premium for dollar dropped further due to sustained receivings from exporters.
The benchmark six-month premium for August declined to 157-159 paise from 159.50-161.50 paise and the far-forward February 2018 contract also edged down to 314-316 paise from 316-318 paise last Friday.
On global commodity front, crude prices retreated in Asian trade on Monday, wiping out some of the gains of the previous session amid worries lower growth targets in China could cut oil demand.